BofA sees Aussie dollar outperforming

17 Haz

Bank of America anticipates diverging monetary policy paths between the Reserve Bank of Australia (RBA) and the Swiss National Bank (SNB) after their respective June meetings, with the RBA seen as one of the last major central banks to cut interest rates.

The Wall Street bank's view was reinforced by robust Australian labor market data, suggesting potential for the RBA to maintain higher rates for longer.

"An unambiguously strong jobs report has further strengthened our conviction in higher-for-longer trades," said Adarsh Sinha, a strategist at Bank of America.

Australian employment jumped by 39,700 in May, beating forecasts of 30,000, driven by full-time hiring as unemployment fell, official data showed.

"We see this as a good entry point for adding higher-for-longer trades, including our recommendation to buy carry-rich AUD/CHF," Sinha added.

Earlier this year, Sinha made similar calls favoring the Australian dollar on expectations the RBA would lag peers in lowering rates.

He cited other factors supporting potential Aussie outperformance in 2024, including a less restrictive RBA policy rate versus other economies, bearish China sentiment subsiding, and Australia's solid fiscal position.

Elias Haddad, senior markets strategist at Brown Brothers Harriman, said he expected the Aussie to gain ground versus the Canadian dollar too, as the RBA is in no rush to cut rates unlike the Bank of Canada.