We are looking for the Australian dollar’s volatility to continue through the third quarter. We see the exchange rate oscillating in a 0.65-0.69-cent range as various crosscurrents play out. The list includes more market turbulence, global and Australian recession fears, China’s stumbling recovery and weaker renminbi, narrower interest rate differentials, the flow support from Australia’s current account surplus (circa-1.4 percent of gross domestic product), and solid underlying commodity demand from the global green energy push. But beyond the next few tricky months, our underlying view continues to be for the Australian dollar to edge up into the low 0.70’s by early 2024. We assume that once the worst of the economic downturn passes, signs of stabilising momentum, lower inflation, a sturdier Chinese economy, and a shift in stance from the Federal Reserve and other central banks – from rate hiking ‘inflation fighters’ to ‘growth supporters’ – should weigh on the arguably-overvalued US dollar and give cyclical currencies like the Australian dollar a boos

Australian dollar, actual versus estimates