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Highlights
- Nomura bets on the Australian dollar to recover by March 18.
- US-China tariffs and global risk sentiment play key roles in Nomura's strategy.
- Short-term risk for US dollar to boost Australian currency’s prospects.
Nomura (TYO:8604) has taken a strategic position in the Australian dollar, forecasting a rise to 66¢ by March 18. The move comes after the Aussie has faced considerable pressure, underperforming against other G10 currencies since the US presidential election in November. Despite challenges such as US tariffs on China, Nomura’s analysts believe the currency has been excessively undervalued.
The Australian economy, heavily tied to global trade, particularly with China, has felt the brunt of trade tensions. However, Nomura’s team, led by Dominic Bunning, head of G10 FX strategy, argues that the market has overreacted to these tariff concerns. Recent tariff announcements have been less severe than originally anticipated, providing an opportunity for a recovery in the Australian dollar.
Bunning noted that the delay in the implementation of reciprocal tariffs, along with the possibility that the tariff plan could reach President Biden around April 1, adds a layer of optimism for the Aussie dollar. This delay in tariffs presents a shift in expectations, which could help the Australian currency recover its footing. Additionally, reports indicating a potential easing of the Russia/Ukraine conflict have contributed to a generally more positive market sentiment, which has favored riskier currencies like the Australian dollar.
The Australian dollar was trading at US63.42¢ on Tuesday, just before the Reserve Bank of Australia’s highly anticipated cash rate decision. This event adds further uncertainty, as decisions regarding interest rates can significantly influence currency values. Nomura (TYO:8604) has strategically positioned itself to benefit from potential upside as global market conditions evolve.
Notably, the US dollar has seen some weakening as global risk sentiment shifts, with investors increasingly cautious about the direction of US monetary policy. This trend adds further support to Nomura’s outlook, encouraging its strategy of positioning against the US dollar in favor of currencies like the Australian dollar.
The Australian dollar appears poised for a rebound, thanks to easing trade tensions, a shift in global risk sentiment, and market overreaction to US-China tariffs. Investors will be watching closely as the situation develops over the coming weeks.
