AUD: Stronger Aussie is well supported by improving fundamentals – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the Australian dollar has derived support overnight from the release of the latest Australian current account report for Q4.

Key Quotes

“The report revealed that Australia’s current account deficit continued to narrow sharply by around two thirds which equates to around 0.9% of GDP. It was the current account deficit’s lowest share of GDP since 1979. It has also helped to further boost confidence that Australia’s economy rebounded in Q4 and avoided a second consecutive quarter of contraction. The Bloomberg consensus forecast for economic growth in Q4 has been increasing and is now at 0.8% ahead of the release of the GDP report tomorrow.”

“The ongoing rebound in commodity prices which are boosting Australia’s terms of trade, Australia’s narrower current account deficit, still relatively high yields on offer in Australia, and very stable global financial market conditions are all encouraging a stronger Australian dollar. The outperformance of the Australian dollar so far this year appears well justified by improving fundamentals, and appears unlikely to reverse in the near-term.”