Forecast for AUD (Australian Dollar) in 2022; AUD performance against main currencies

This article looks at the trend in the Australian dollar forecast in 2022.

2022 US dollar USD Forecast

Bank forecasts for the Australian dollar in 2022

  • In early 2022, the Australian Dollar rose to an almost 3 year high versus the US Dollar, analysts are not expecting a repeat performance in 2022. Although they are cautiously positive on the AUD outlook.
  • HSBC sees the Australian Dollar, also known as the Aussie, rising in 2022 as the Australian economy grows stronger.
  • ING expects the  Australian jobs market to improve in 2022, which would support the Aussie. However, uncertainty regarding the Chinese economy could limit gains in the Aussie given that China is Australia’s largest trading partner.
  • Australian Bank Westpac, expects the Australian economy to grow in 2022, which would support the Aussie. The expect economic growth of 6.4% in 2022.

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2022 AUD forecast

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What’s the impact of a weak AUD Dollar (AUD)?

  • Australia is an export-orientated economy, so a weaker Australian Dollar can boost the economy. This is because Australian products and services become more competitive in the global market.
  • Overseas buyers of Australian goods and services also benefit from the cheaper prices.

What’s the impact of a strong Australian dollar (AUD)?

  • A high Aussie Dollar can make exports more expensive. This could drive overseas buyers to buy from other countries with cheaper products and services. Iron ore and coal are Australia’s top exports, high exchange rates would hurt these industries and the Australian economy.
  • Australian imports would benefit from a stronger Australian Dollar  because imported goods would be cheaper. This could boost the Australian retail sector

What are the key influences on the AUD?

  • The Australian dollar is  seen as  a riskier currency, it is closely tied to commodity prices which can have big swings.
  • When the  global economic or geo-polititcal outlook improves,  AUD often rises. When the global economic or geo-political outlook worsens the aussie often falls.
  • The pandemic has been a key influence for the Australian Dollar. Improving vaccine rates could help the currency rise. Meanwhile the discovery of new, more severe or more contagious strains of COVID could hurt demand for the Australian Dollar

 

1. The Economy

  • Australia’s economy is influenced by commodities. Australia exports  commodities, particularly metals to China. 
  • When economic growth quickens in China, commodity prices often rise and, the value of the Australian dollar often rises too.
  • Similarly, slower economic growth in China can hurt the value of the AUD.
  • The Australian jobs market is also a key factor when considering the health of the Australian economy. Falling unemployment can boost the value of the Australian Dollar.
2022 US dollar forecast

 

2. Politics

  • Political relations with China are important for the Australian dollar because China is Australia’s main trading partner.
  • In 2022 there were times when Chinese -Australian  relations deteriorated, which pulled the Australian Dollar lower. Should relations worsen across 2022, the Australian dollar could fall.
  • Regarding domestic policies, should the government implement measures which are considered supportive of economic growth, AUD could rise.
  • Should tax hikes be part of the government’s plan this year, AUD could come under pressure.

3. Other Currencies

  • The value of the Australian dollar can depend on the value of other currencies.
  • The Australian Dollar and Japanese yen have an interesting relationship. Investors often look at the yen as a safe haven, the opposite to the riskier aussie. When the Japanese yen rises the Australian dollar often falls and vice versa.
  • The Australian Dollar and the New Zealand Dollar are both called commodity currencies. This is because they are both influenced strongly  by the price of commodities, the main exports for Australia and New Zealand.

AUD/USD performance in 2022

  • ING sees AUD/USD rising to 0.75 by the end of 2022.
  • CIBC also forecasts that the pair will rise slightly to 0.75 by the end of 2022
  • However, Citibank expects the aussie to fall against the US Dollar to 0.71 over the coming 6 -12 months.
  • Westpac expects AUD/USD to rise by the  end of 2022, to 0.73

AUD/NZD performance in 2022

  • Westpac forecast that AUD/NZD will stay at approximately the same level that it is now, across 2022.
  • Analysts at NAB predict that the Australian Dollar will rise in value against the New Zealand Dollar, reaching 1.08 by the end of 2022.

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US Dollar against other currencies

  • Both the Australian and the UK economy are expected to continue growing in 2022. The UK economy is forecast to grow 4.7% and the Australian economy is expected to grow 4.1% in 2022.
  • Lingering Brexit issues could hurt the pound. Meanwhile China poses a risk to Australia as growth in Australia's largest trading partner slows.
  • NAB expects the Australian Dollar to rise slightly against the Pound, reaching 0.56 by the end of 2022.
  • The Australian Dollar weakened against the Indian Rupee is 2022 as both economies grew after the pandemic.
  • Australia could see interest rates lifted before India which would support the Australian Dollar.
  •  However, the Australian Dollar could be held back by slowing growth in China.
  • If investors are positive about the state of the global economy in 2022 then the Australian Dollar will rise against the Japanese yen, which is considered a safe haven currency.
  • Should uncertainty from new coronavirus strains rise then the Australian Dollar could fall versus the Japanese Yen.

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By Ileana Ionescu Updated December 23rd, 2021