These G-10 currencies are in for a bumpy ride

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The euro dominated headlines in the first quarter of 2015, but the Japanese yen and Australian dollar will be in focus later this year, analysts say, as both are likely to buckle when the Federal Reserve raises interest rates.

"The theme this year will continue to be U.S. dollar strength against the major G-10 currencies, including the Japanese yen, as well as the Australian and New Zealand dollars," ANZ senior FX strategist Sam Tuck told CNBC by phone. The U.S. dollar's dominance is so solid "the key risk event this year is the timing of the U.S. Federal Reserve raises interest rates."

The U.S. dollar index has risen 8.7 percent year to date and 22.6 percent over the past 12 months.

Of the G-10 currencies, the euro fell hardest against the U.S. dollar in the first quarter, sliding 10.7 percent on the back of the European Central Bank's quantitative easing program.

In the Asia Pacific region, the Australian and New Zealand dollars also fell, albeit by a more modest 6.9 percent and 4.5 percent, respectively, against the greenback. The Japanese yen was able to resist the U.S. dollar's rise, however. It remained stable after dropping 6.3 percent in the last two months of 2014.

Investors tip an imminent Fed rate hike as the likely catalyst for further dollar gains, though the timing remains uncertain.

"The U.S. dollar will peak when the Fed raises rates, probably after the Federal Open Market Committee meeting in June," Macquarie FX strategist David Forrester told CNBC by phone.

Catalyst for yen weakness

Asian central banks will also play an important role in how their currencies fare, analysts say.

For the yen, speculation that the Bank of Japan (BOJ) will ease monetary policy again is likely to trigger a renewed sell off. The Japanese currency has weakened around 29.2 percent against the dollar since April 2013 on the bank of the central bank's massive quantitative easing effort.

Indeed, Governor Haruhiko Kuroda has insisted that no more easing is needed, but some investors believe that it's inevitable.

"The inflation rate will likely be negative over the summer and the BOJ will be under pressure to act again by October," said Mizuho Securities' chief currency strategist Kengo Suzuki.

Suzuki sees the yen at 127 per dollar by year-end and ANZ's Tuck forecasts 125 per dollar. The yen was quoted at 119.74 in early Asian trading on Thursday.

Further to fall down under

In Australia soft commodity prices will continue to pressure the Reserve Bank of Australia (RBA) to ease, analysts say.

"Iron ore prices are hovering below $50 a tonne, and that will keep the pressure on the Reserve Bank of Australia to continue to cut rates," said Macquarie's Forrester, who sees the Australian dollar at $0.72 by the end of September.

Iron ore prices are at their lowest level since a key benchmark pricing index began in 2008, according to Reuters, amid increasing supply and waning demand from China. Australia is the world's second-largest iron-ore producer.

In February, the RBA cut interest rates to a fresh record low of 2.25 percent citing below trend economic growth as the government tries to rebalance the economy away from its dependence on resources.

ANZ's Tuck expects the Aussie dollar will fall to $0.72 year-end.

Despite diverging monetary policies following the Royal Reserve Bank of New Zealand's rate hike this month, the New Zealand dollar may continue to mirror the Australian currency's moves.

Macquarie's Forrester see the Kiwi dollar at $0.71 by the end of September, while ANZ's Tuck forecasts $0.7070 by year-end.

The Australian dollar was trading at $0.758 and the Kiwi at $0.743 in Asia on Thursday.

The long shot

While investors are divided over the timing of a rate hike, they all expect that rates will rise this year. The biggest risk, analysts say, is that it doesn't happen.

"If the recent run of soft U.S. economic data continues and the rate hike is delayed, the U.S. dollar could fall against major currencies," said Macquarie's Forrester.