Despite the Australian dollar's drastic slide since Tuesday, the local currency should maintain its current level for the rest of the quarter, according to analysts at the major banks.
The local currency pushed up a quarter of a cent to US74.85¢ on Thursday, buoyed by strong economic data including a 0.4 per cent rise in March retail sales as well as a nearly 30 per cent fall in the trade deficit to $2.1 billion (also for March), thanks to a 4 per cent rise in exports.
But the Aussie was still down nearly 2.5 cents from just over US77¢ prior to the Reserve Bank's interest rate cut to 1.75 per cent on Tuesday.
Little return: There were plenty of economists around this week happy to fall into line with the central bank's decision to cut interest rates to an all-time low of 1.75 per cent, based on the weak inflation numbers released last week. Photo: Glenn Hunt
National Australia Bank co-head of foreign exchange strategy, Ray Attrill, said the rate cut reinforced NAB's existing Australian dollar forecast - US74¢ by the end of June, US71¢ by the end of September and US69¢ by the end of the year.
"After the rate cut I'm a little bit more comfortable with the forecasts than I might have been had the Reserve Bank stayed put," he said.
Commonwealth Bank currency strategist Elias Haddad said a number of factors were still supporting the Aussie: commodity prices had bottomed and were on the way up; high-yield Australian assets were continuing to attract foreign investment; and the US dollar had peaked the US rate rise in December.
"We still expect the Australian dollar to remain within a broad US75¢ to US80¢ range at least until the beginning of next year," he said.
However, further rate cuts from the Reserve Bank remained a "clear and present danger" to the forecast, said Mr Haddad.
ANZ currency analyst Daniel Been said the rate cut did not alter ANZ's Australian dollar forecast.
"No - we were looking for US74¢ this quarter and that's looking pretty good," he said.
Westpac analysts Damien McColough and Rob Rennie said a number of fundamentals were supporting the Aussie.
"Despite the rate cut we maintain our view that the Australian dollar should be well supported on dips towards US75¢," they said.
"With iron ore holding (for now) above $US60 per tonne, premium coking coal closer to $US100 per tonne, export volumes rising plus reduced concerns about China and improved global risk sentiment, it's hard to see the A$ much below that level near term, though Friday's Reserve Bank Statement of Monetary Policy will be closely watched for forecast changes."
Some forecasters, however, were more bearish on the Aussie - at least for the short-term.
"The prospect of the Reserve Bank easing again and the US Federal Reserve hiking sooner than expected...could potentially push the Australian dollar lower to US72¢-US73¢," said easyMarkets senior dealer Andreas Tjahja.
That was also the view of IG market analyst Angus Nicholson.
"The combination of the Reserve Bank rate cut, bounce in the US dollar, and wilting commodity prices is setting the Aussie dollar up for a fairly sustained drop," he said.
"The Aussie dollar lost 2.3 per cent overnight (Tuesday) and crucially broke through its key support level at US75¢.
"If we do start to see consistent momentum behind this selloff, a move down to US72¢-US73¢ could happen within a week."
