The key points are:

The strength of the Australian dollar is likely to persist, supported by its prior undervaluation, the RBA’s position as the first major central bank to begin tightening after a rate cutting cycle, ongoing US dollar weakness, and elevated average commodity prices.
Another 5% appreciation in the $A is possible in the short-term. We expect the $A to settle between 0.70-0.75 USD over coming months.
A stronger $A is a form of “tightening in stealth” as it should help to dampen tradable (or imported) inflation which will help in slowing trimmed mean inflation to below 3% by late 2026.
A higher $A also puts upward pressure on imports and reduces exports, which is a headwind to GDP growth. Inbound tourism could soften from the higher currency, but outbound tourism will benefit.

Rick Maggi, Financial Advisor (Perth)

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Disclaimer
This article has been carefully prepared by Westmount Securities Pty Ltd (ABN 42 090 595 289, AFSL 225715) for general information purposes only. However, neither Westmount Securities Pty Ltd nor any of its affiliates guarantee the accuracy or completeness of any statements contained herein, including any forecasts. It is important to note that past performance is not a reliable indicator of future outcomes. This material does not consider the specific objectives, financial circumstances, or needs of any particular investor. Therefore, before making any investment decisions, investors should assess the relevance of this information to their individual situation and consult professional advice, taking into account their unique objectives, financial position, and needs.