The Australian dollar is recently experiencing a boom in demand, thanks to which it is growing from time to time. Many experts consider Aussie to be one of the most profitable investments at present.
On the first day of spring, the Australian dollar, along with other risky currencies, rose significantly against the US dollar. Analysts attribute this to a decrease in concerns about a possible tightening of monetary policy. Earlier, such anxiety provoked a large-scale sell-off of global bonds on the world market.
On Monday, March 1, the Aussie added 0.6%, reaching 0.7754. Recall that last Friday, February 26, Aussie fell by 2.1% against the greenback but now it has made up for the lost time. At the beginning of this week, the AUD/USD pair is trading near 0.7729–0.7730, trying to get out of this range.
According to Elias Haddad, currency strategist at CBA, the two-day decline in the Australian dollar against the USD presents a favorable buying opportunity. CBA points out that the external background for the Aussie remains positive. Haddad added that at present, the likelihood of increasing the rate of purchase of bonds by central banks has increased. This is necessary to contain the destabilizing growth in profitability, which is beneficial for the Aussie. The CBA expert believes that the implementation of such a scenario will strengthen reflation and support the AUD/USD pair.
The current differential of 10-year government bonds of Australia and the United States approached multi-month highs. According to analysts, this indicates that Australia is a kind of "magnet" for portfolio capital. Investors' interest in Australian government bonds is due to their high yield. Market participants are looking for lucrative long-term foreign debt, and Australian stocks are leading the way.
CBA specialists recommend buying the AUD/USD pair at current levels with a stop loss of 0.7560 and a target of 0.8200. Note that in the last week of February, the Aussie briefly climbed to 0.8000, but then lost its achievements. The bank's experts advise opening a long position on the AUD/USD pair, taking into account the difference in interest rates. According to experts, the AUD/USD pair remains undervalued. The value of the Aussie as a commodity currency is influenced by iron ore prices and post-COVID-19 general trading conditions.
Experts consider the current rhetoric of the Reserve Bank of Australia (RBA) to be an additional driver of AUD strengthening. Analysts stressed that soon it will be aimed at supporting the national currency. The next meeting of the RBA is expected on Tuesday, March 2. Market participants expect the current monetary policy to continue, despite the strengthening of the Australian dollar and given the rise in prices for LNG, iron ore, and coal - the country's main export commodities. The existing strategy of the regulator is able to prevent excessive appreciation of the "AUD", experts summarize.
