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I think the market had been waiting for this weakening for some time. The escalation and uncertainty regarding Europe has driven the Aussie below parity. We are now expecting AUD/USD at the year end at around 97, a continued move below parity.
What are the reasons behind further Aussie depreciation?
The Aussie depreciation has been driven by the global risk aversion and by the worries about Greek politics and Spanish banks, as well as the ongoing downward pressure on the Aussie Dollar relating to lower interest rates in Australia after the Reserve Bank cut interest rate 50 basis points earlier this month.
If eventually Greece exits the Eurozone, how that move may affect the Australian Dollar?
It certainly will affect the Aussie Dollar in a very short-term due to unexpected increase in volatility in markets. That tends to make carry trades with the Australian Dollar more attractive for the time being. If we do see Greek exit from the Eurozone, an increase in instability is likely to make the Aussie Dollar sharply weaker.
What is your forecast for AUD/USD for the second quarter and for the end of this year?
We expect AUD/USD at the end of Q2 to trade at parity level, and for the end of the year we forecast the Aussie to be at 97 cents against the US Dollar.