AUD: Societe Generale says resilience favors holding positions

Australian Dollar Shows Strength Amid Rising Oil Costs

Kit Juckes of Societe Generale points out that the Australian Dollar has managed to stay strong, even as oil prices climb and Australia continues to depend heavily on imported petroleum. He observes that traders holding long positions in the AUD have not exited their trades, and the AUD/USD pair has experienced only minimal declines since late February.

Juckes emphasizes that shifting interest rate differentials are increasingly favoring the Australian Dollar, which supports the case for maintaining long positions.

Resilience in the Face of Oil Price Surges

Despite the upward trend in oil prices, the Australian Dollar has demonstrated notable stability.

Although Australia is a significant exporter of commodities such as natural gas, its economy remains exposed to the risks posed by sustained increases in oil prices.

Juckes recalls that just a week ago, there were concerns that the combination of substantial speculative long positions in the AUD and the nation's reliance on imported oil could prompt a correction in the currency, even though the outlook for the coming months remains optimistic.

However, investors appear unwilling to abandon their favored long AUD trades.

Since the onset of the US conflict with Iran, the AUD/CAD pair has delivered positive returns, and the AUD/USD has dipped by only 0.06% since February’s end—a testament to the currency’s resilience.

Furthermore, interest rate trends continue to shift in favor of the Australian Dollar, offering even greater support now than when AUD/USD stood at 0.76 in 2022.

(This report was produced with AI assistance and subsequently reviewed by an editor.)