The Australian dollar may be losing its momentum as three major banks in Australia have lowered their forecasts due to the phasing out stimulus of the US Federal Reserve and China's commodity prices.
The National Australia Bank has reduced its forecasts until the end of 2014. The NAB has tipped the Australian dollar to fall US88 cents from US93 cents on previous December forecasts. The reduced forecast followed the previous ones made by Goldman Sachs and Westpac earlier this week.
Spokesperson for National Australia Bank's foreign currency exchange strategy team said the US Fed's return to the early stages of normalising policy only justifies the need for NAB to lower the AUD/USD exchange rate to US80 cents range.
The foreign currency exchange team also said they project a modest decline in terms of trade in Australia throughout 2014 due to weak growth of commodities in China than they have previously expected.
NAB is hopeful China will grow by 7.5 per cent in 2014. However, a lower prediction for the Australian dollar will be expected once they have the second quarter GDP data due out next month.
Goldman Sach's economists earlier this week were also forced to revise their previous forecasts after the Australian dollar failed to live up to their forecasts. Goldman predicts the dollar will drop to US86 cents next year. Economists also expect a US85 cents exchange in 2015 from previous dollar forecasts of US89 cents.
The Australian dollar fell 13 per cent since the middle of April. Investors have shifted their assets back to the US as the country's economy begins to rise from its slumber. This led the US Federal Reserve to start raising interest rates in the future.
Westpac predicts the Australian dollar will be somewhere between the low and mid US90 cents in 2014 which is also lower than its previous forecast of US96 cents.
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