The Australian dollar is projected to experience further gains as Australia’s largest pension funds are likely to increase hedging of their US assets. This move aims to protect their investments from policy uncertainties. Ray Attrill, Head of Foreign-Exchange Strategy at National Australia Bank in Sydney, suggests that tariff risks and expectations of interest rate cuts by the Federal Reserve should weaken the US dollar, prompting Australian pension funds to increase currency hedging for their US assets.
Attrill anticipates a negative market response to a more stringent global tariff regime. He forecasts the Aussie to rise by nearly 3 per cent by the end of the year. Australian super funds, managing a substantial $4.1 trillion ($US2.7 trillion) asset base with significant offshore exposure, are crucial in supporting demand for the local currency. These funds manage retirement savings for millions of Australians, investing across a diverse range of asset classes both domestically and internationally.
There are indications that some funds, including AustralianSuper, are reassessing their US allocations in light of President Donald Trump’s efforts to reshape global trade. AustralianSuper is one of the nation’s largest superannuation funds, managing the retirement savings of a significant portion of the Australian workforce. The fund invests globally across various asset classes to provide long-term returns for its members.
In addition to these factors, the Aussie, which has already appreciated against most of its Group-of-10 counterparts this month, may receive an additional boost from the upcoming second-quarter inflation data scheduled for release on Wednesday. The data is anticipated to further bolster the currency’s upward trajectory.
