Westpac: Near-Term Risk Of Test Of $0.70, Still See $0.78 At Year-End

Westpac note that "AUD/USD this month printed at the lowest level since Nov '20. While the USD has been broadly strong, AUD is the weakest in the G10. A$ underperformance is to be expected when risk aversion picks up, but Australia's COVID lockdowns have also weighed, with Q3 GDP likely to show a steep contraction. The $80 tumble in iron ore prices in just a month has not helped, a reminder that a less robust trade position lies ahead. Near term risks are for a test of $0.70 if the USD remains solid. But by late Q3 and early Q4 the Aussie should be finding support from the conversion of historically immense mining dividends, A$18bn or more. Moreover, by October Australia's catch-up on the vaccination front should be starting to result in eased restrictions and thus scope for the economy to rebound. The A$ should recover to around $0.75 at this stage, with our year-end target still $0.78."