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Iron Ore Key To AUD Direction Says CBA

AUD

CBA's model suggests fair value for AUD/USD has increased, despite some downside pressure on spot.

  • "Our updated (monthly) equation suggests fair value for AUD/USD continues to increase. We now estimate fair value for AUD/USD is in a range of 0.76 to 0.88, centred on 0.82. Once again, elevated iron ore prices are behind the lift in our estimated fair‑value range. However, we think 0.82 might be the peak in fair value, at least in the near term. Spot iron ore prices have fallen some 8% recently (although remain elevated) because of concerns over Chinese demand. Over 80% of Australia's iron ore exports are destined for China. As we have mentioned previously, potentially weaker Chinese demand for iron ore is the major external risk to AUD/USD."
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