BofA Lifts AUD/USD Forecast to 0.73 on RBA Policy Shift

BofA Revises AUD/USD Forecast Upward

Bank of America has increased its fourth-quarter 2026 forecast for the AUD/USD exchange rate to 0.73. This revision follows a recent interest rate hike by the Reserve Bank of Australia, which created several tailwinds for the currency.

Key Drivers Behind the New Forecast

The RBA's rate increase pushed Australian policy rates above those of the U.S. Federal Reserve for the first time since 2017. Bank of America's analysis also points to other supporting factors, including gradual increases in commodity prices and an anticipated decline in the U.S. dollar against Asian currencies.

Market Outlook and Potential Risks

While the outlook for the Australian dollar is positive, the institution highlights potential risks. An upside risk could emerge from a shift in hedge ratios by Australian superannuation funds. Conversely, a significant downside risk is the current crowded long positioning in the Australian dollar.

Summary

The revised forecast reflects a more bullish stance on the Australian dollar, driven primarily by divergent central bank policies and supportive commodity trends. However, investors should monitor market positioning as it presents a key vulnerability to the outlook.

FAQ

Q: Why did Bank of America raise its AUD/USD forecast?
A: The main driver was the RBA's rate hike, which put Australian interest rates above U.S. rates, supported by rising commodity prices and a weaker USD outlook.

Q: What is the new AUD/USD forecast from BofA?
A: The new forecast is 0.73 for the fourth quarter of 2026.

Q: What are the primary risks to this forecast?
A: The primary downside risk is the large number of existing long positions in the Australian dollar, which could amplify negative movements.

Source: Investing.com