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CommBank US dollar forecasts raised

CommBank US dollar forecasts raised

CommBank currency strategists have changed their forecasts for the US dollar ahead of potential US tax reform.

The Australian dollar is expected to be at 78 US cents by December 2017 and 83 US cents by December 2018, according to the latest report from CommBank currency strategists. Previously, the forecast had been 80 US cents by December 2017 and 85 US cents by December 2018.

“We are lifting our US dollar forecasts to reflect the likelihood of a stimulatory tax package getting passed by Congress, stronger US Gross Domestic Product growth, our higher forecast Federal Reserve funds rate, and a re-emergence of monetary policy divergence with the European Central Bank,” the report said.

Despite the change in forecast, it’s been a strong year for the Australian dollar. On the second of January the Australian dollar was worth 71.84 US cents, but by 8 September it was up to 80.60 US cents. More recently it has slipped back under 80 US cents.

Following the Reserve Bank of Australia’s decision to keep the official cash rate on hold at 1.5% on Tuesday 7 November, the Australian dollar dropped to 76.45 US cents.

The upcoming decision on tax reform in the US may continue to impact forecasts for 2018.

“While we don’t know final details of the tax package, cuts to the US company tax rate are supportive for the US dollar. Further, US dollar forecast changes may occur once we know the details of the final US tax package,” said the report.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. As the information on this page has been prepared without considering your objectives, financial situation or needs, you should, before acting on the information, consider its appropriateness to your circumstances. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Past performance is not an indication of future performance.