OCBC strategists Sim Moh Siong and Christopher Wong maintain a constructive outlook on the Australian Dollar (AUD), despite recent risk-off sentiment triggered by higher energy prices [1]. They cite several supportive factors for the AUD, including above-target inflation, resilient domestic economic activity, and a more hawkish stance from the Reserve Bank of Australia (RBA) [1]. The strategists note that while markets have largely priced in further rate hikes, the actual implementation of these hikes should bolster the AUD by reinforcing central bank credibility [1].
Australia's hawkish rate pricing is described as more durable compared to Europe, due to the country's relative insulation from energy supply risks [1]. Structural flows are also highlighted as a key support, with Australian super-fund hedge ratios continuing to rise. Specifically, 4Q25 data showed a 1.4-percentage-point increase in these hedge ratios, and media reports indicate further increases are expected, providing a steady tailwind for the AUD [1].
Despite elevated uncertainty, OCBC strategists remain positive on the currency and now expect AUD/USD to reach 0.75 by the end of 2026 [1].
CONCLUSION
OCBC strategists project a constructive path for AUD/USD, supported by hawkish RBA policy, resilient domestic activity, and rising super-fund hedge ratios. Their forecast targets 0.75 by end-2026, suggesting medium-term optimism for the Australian Dollar despite current risk-off pressures.