Australian dollar stock weakens, Capital Economics sees continues weakness

Published 07/08/2025, 09:18
Australian dollar stock weakens, Capital Economics sees continues weakness

Investing.com - The Australian dollar has weakened against the U.S. dollar as Capital Economics forecasts further declines for the currency in the second half of 2025.

Capital Economics reports that while the Australian and New Zealand dollars have recovered somewhat since early April, the research firm believes "the best days for the Aussie and Kiwi are now in the rear-view mirror." The firm expects both currencies to weaken against the U.S. dollar through the remainder of the year.

The Antipodean currencies had previously been "the worst victims of global trade tensions" according to Capital Economics, but have performed better relative to other G10 currencies since April 9th when global equities hit a trough. Both currencies benefited from improving global risk appetite during this period.

Capital Economics notes that the Australian and New Zealand dollars were the worst-performing G10 currencies through late 2024 and the first quarter of 2025. This poor performance stemmed from weakened risk appetite amid trade uncertainties, deteriorating sentiment around China’s economy, and unfavorable yield differentials.

The research firm highlights that both currencies are highly sensitive to global risk sentiment, which has "rebounded strongly" since April. This rebound has coincided with improved sentiment around China’s non-tech sectors, which typically benefits both Australia and New Zealand.

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