Rabobank’s Senior FX Strategist Jane Foley notes that despite the Reserve Bank of Australia being the only G10 central bank to hike rates last week, the Australian Dollar has underperformed recently versus peers. She links this to prior outperformance and shifting G10 rate expectations. Foley's energy assumptions support a forecast for AUD/USD to revisit 0.71 in coming months and 0.72 in twelve months.

AUD resilience versus global risk backdrop

"Of the eight G10 central banks that announced policy decisions last week, the RBA was the only one to hike rates. Even so, the AUD has not performed particularly well vs. a basket of its peers on a month-to-date, 5-day or 1-day view. Some of this lacklustre performance vs. the rest of the G10 can be explained by the fact that the AUD is still the best performing G10 currency in the year to date."

"Going forward, a worsening in risk appetite on war-related news may still result in another broad-based surge in the value of the USD linked to safe-haven flows which would weigh on AUD/USD. The current assumption of our energy strategists is that a full closure of the Strait of Hormuz may last until the end of April and that shipping will then slowly return. We assume that crude oil and refined product flows are likely to be around 80% of pre-war levels by August."

"While shortages of refined petroleum products carry both inflation and growth risks, Australia’s position as a net energy exporter should offer some protection to its terms and trade during this crisis which by implication should offer some support to the AUD."

"On this basis we remain of the view that AUD/USD will return to the 0.71 area on a 3-to-6-month view and we retain our 12-month target of 0.72."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)