Australian Dollar: Aussie holds near highs against US Dollar - BBH

Brown Brothers Harriman’s Elias Haddad highlights that the Australian Dollar is outperforming, with AUD/USD trading near the top of its recent 0.6900–0.7000 range. Despite IMF estimates of notable overvaluation, BBH notes that AUD/USD is broadly aligned with Australia–US 2‑year rate differentials, suggesting limited immediate downside risk from valuation alone.

Outperformance despite valuation concerns

"AUD is outperforming, with AUD/USD trading near the top of its three-week 0.6900-0.7000 range."

"RBA Assistant Governor Christopher Kent noted the “Aussie dollar at the moment is marginally above the long-run equilibrium estimates for the real trade-weighted index"."

"Indeed, the IMF estimates AUD overvaluation at 17% on a real effective exchange rate basis."

"Nonetheless, AUD/USD is generally in line with real and nominal 2-year Australia-US interest rate differentials, suggesting its lofty valuation poses little immediate downside risk."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)