Analysts Warn Australian Dollar Rally May Have Peaked

Forecasters from SB1 Markets AS, Banco Santander SA, and Danske Bank AS warn that the Australian dollar's two-month rally may have peaked. The currency gained over 3.5% since July, driven by expectations that the Reserve Bank of Australia would hike interest rates to combat sticky inflation.

Analysts now suggest the central bank may stand pat in September, a move that could trigger a currency retreat. Santander Group and Danske Bank strategists expect the currency to fall to 70 US cents by December, while SB1 Markets AS predicts a potential decline of up to 3.7% by year-end.

External pressures are also weighing on the currency. A potential resolution to the conflict in Iran could lower oil prices, impacting commodity-exposed currencies. Additionally, hawkish rhetoric from Federal Reserve Chairman Kevin Warsh may reduce the appeal of US dollar weakness, further tempering momentum. Economic growth data due the week of August 31 will serve as a key test for current rate-hike bets.