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Investing.com -- UBS revised its forecast for the Australian dollar against the US dollar (AUD/USD) downwards and closed its long-standing recommendation for the Australian dollar against the Swedish krona (AUD/SEK), which was established back in March.
The Swiss financial services firm cited the Australian dollar's vulnerability to extreme equity market volatility and the impact of China's retaliatory tariffs as key reasons behind their decision.
"AUD has emerged as the main casualty of the most recent spike in volatility, falling to the levels last seen at the height of the Covid pandemic stress in March 2020," analysts said.
The Australian dollar has been under pressure recently, with fluctuations in the global equity markets and trade tensions between the United States and China affecting its performance.
UBS noted that while a short-term recovery for the Australian dollar is possible, escalating trade disputes between the world's two largest economies present a significant risk. This ongoing situation has led UBS to adopt a more conservative stance on the currency's medium-term prospects.
The Australian economy itself has limited direct exposure to US protectionist policies, but the currency has still felt the impact of the broader geopolitical climate. The tension between the US and China has shown no signs of a clear resolution or "off-ramp" to de-escalate the situation.
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