AUD: Valuation remains a concern - ANZ

Research Team at ANZ, suggests that the valuation remains a concern for the AUD with the continued compression in yield spread to the US and the marginal deterioration in credit spreads having no impact on the AUD.

Key Quotes

“That said, the level of overvaluation is not such that it can be the prime driver of the AUD.

In line with this departure from fundamentals there is an increase in proportion of AUD crosses that are becoming momentum-driven. This remains the case against European currencies, but increasingly Asian crosses are also becoming momentum driven.

What has been unusual about this is that the momentum for European crosses is pushing the AUD higher, while against the Asian crosses (like JPY and KRW) the AUD is underperforming. This likely provides some guide as to why the AUD is stuck in a range against the USD.”