Analysts at Goldman Sachs note that "following a surge in commodity prices, Australia's terms of trade have improved dramatically, yet the currency has broadly underperformed so far this year, suggesting that the aussie dollar’s correlation with the commodity prices may have weakened.
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“Part of the reason for this seems to be that better terms of trade have less of a positive impact on the economy now than before. Higher iron ore prices are not triggering new investment like in the last commodity cycle and, rather than boosting national income, much of the earnings are repatriated abroad."
"Meanwhile, other important determinants of the Australian Dollar have been much softer. For both structural and cyclical reasons, interest rate differentials have narrowed considerably. Given softer pre-pandemic conditions and the RBA's focus on realized price and wages inflation, rates are likely to stay lower for longer in Australia than its peers, which would further weigh on the currency."
"In addition, although a number of equity indices are at or near all-time highs, underlying growth barometers have been softer, consistent with AUD's underperformance. Overall, we do not think the currency is particularly out of alignment; we see more underperformance for AUD against its close peers, and it would not be our preferred currency in G10 for pro-cyclical USD shorts."