With the Australian dollar recently hitting 2 to 3 month lows, Macrobusiness has revisited its five drivers model and predicts more falls for the Australian dollar. The first factor, being interest rate differentials are still favourable to the Australian dollar but the spread has stopped widening with interest rate rises no longer priced in. Secondly, the outlook for growth in Australia, China and the globe continues to be subdued, especially Chinese growth where a recent spike in activity appears to be petering out. The third and fourth drivers as technical indicators also appear to be in a downtrend and breaking the support level of 92.8 US cents. Finally, the last driver is the US dollar which has weakened slightly with the uncertainty about the Federal Reserve's taper. On balance, these factors point to a possibility that the Australian dollar will make new lows this year. (VIEW LINK)
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