OCBC strategists Sim Moh Siong and Christopher Wong highlight that the Reserve Bank of Australia’s latest 25 bps hike to 4.35% and a more balanced guidance underpin a constructive Australian Dollar outlook. With AUD now offering the highest carry in G10 FX and benefiting from its role as an energy exporter, the bank expects continued currency outperformance versus peers.

High carry and exporter status back AUD

"The RBA raised rates by 25bps to 4.35% in an 8-1 vote, a more decisive vote split from the prior 5-4 split and returning policy to a post-Covid high. The majority, including Governor Bullock, cited persistent upside risks to inflation and inflation expectations as justification for tightening."

"After three consecutive hikes, the forward guidance turned more balanced. The RBA now appears to be adopting a hike-and-hold approach, signalling a likely pause as it assesses the economic impact of higher fuel prices."

"With the AUD now offering the highest carry in G10 FX, its yield advantage, combined with its high-beta exposure as an energy exporter, should continue to support currency outperformance."

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