Aussie and kiwi dollars may depreciate further

The Australian and New Zealand dollars have weakened to US$0.74 and US$0.68 respectively as rising trade tensions between the US and China have reduced the appetite for riskier currencies. Looking ahead, the Aussie and kiwi dollars may weaken further. Our forecast that the price of iron ore will fall to US$60 per tonne by the end of the year, alongside our relatively dovish view on the outlook for interest rates in Australia, suggests that the Australian dollar may fall to US$0.72 by the end of 2018. And the risks to our forecast that the kiwi dollar will end the year at US$0.68 are increasingly on the downside.