UBS Raises AUD/USD Target#
UBS has adjusted its year-end price target for the Australian dollar (AUD) against the U.S. dollar (USD) to 0.74. This change is based on improved economic fundamentals and a steady demand for the Australian currency in the market.
Short-Term Outlook#
The firm has also set a target of 0.72 for AUD/USD by the end of the second quarter, which is slightly above current market levels. UBS acknowledges that there are imbalances in market positioning, meaning that some traders may be overly optimistic or pessimistic about the currency's performance.
Strength of the Australian Dollar#
According to UBS, there is no strong reason to expect a decline in the Australian dollar's value, given the positive economic indicators that have contributed to increased interest in the currency. The firm believes that this trend is likely to continue.
EUR/AUD and AUD/NZD Forecasts#
UBS prefers to express its bullish view on the Australian dollar through short positions in the euro against the Australian dollar (EUR/AUD). The updated forecast for EUR/AUD suggests it could drop to 1.61 by the end of the second quarter and further to 1.54 by year-end. Additionally, UBS has revised its AUD/New Zealand dollar (NZD) forecast to 1.22 for the end of the second quarter and 1.20 by year-end, aligning with its latest estimates of fair value based on purchasing power parity. The firm notes that the current market positioning may leave the AUD/NZD pair vulnerable to a decline, but any significant drop is unlikely without stronger economic support for the New Zealand dollar.