AUD seen at 67 US cents by year-end, likely to fall lower over the first half of 2020: St. George Economics

The Australian dollar is seen to trade at 67 US cents by the end of this year, but it is expected to fall lower over the first half of next year, according to the latest research report from St. George Economics.

The Australian dollar fell to a recent low of 66.71 US cents on October 2, down from this year’s high of 72.95 US cents on January 31.

Developments around trade relations between the US and China have been the dominant theme driving market sentiment and the Australian dollar for nearly two years. The global trade tensions have been a key factor in bringing down the Australian dollar.

Downside risks to the Australian economic outlook have also placed downward pressure on the currency. Domestic economic growth is close to its weakest in a decade and the RBA has lowered the cash rate three times this year to a record low of 0.75 percent, the report added.

Risks for the Australian dollar continue to be skewed towards the downside. While a “phase-one” deal between the US and China has given investors hope that trade tensions are thawing, global growth prospects remain mixed.

"Moreover, Australian economic growth is expected to remain below trend and fall short of the RBA’s forecasts. We expect that the RBA will ease monetary policy further in 2020," St. George Economics further commented in the report.

Despite the various risks to the global and domestic economy, movements in the Australian dollar and currency markets overall this year have been extremely muted. The trading range of the Australian dollar this year has been one of the narrowest since the dollar was floated in 1983. Indeed, only 1991 had a narrower trading range in the post-float era.