The Australian dollar's persistent buoyancy won't last forever, ANZ said, keeping a bearish view even as it raised its near-term forecasts for the currency.
"While we continue to think that the fundamental grounds for a rally are not in place, market volatility has not provided the catalyst for weakness that we anticipated," the bank said. "We cannot identify near-term drivers of a significant depreciation," it said, noting the lack of Brexit contagion and an indication that the Federal Reserve may accept a lower neutral rate.
A neutral interest rate is the rate at which monetary policy neither accelerates economic growth or slows it down; many economists have postulated recently that the U.S. neutral rate may now be lower than in previous economic cycles.
ANZ increased its end-year forecast for the Australian dollar to $0.76, up from $0.67.
The currency has rallied hard this year, rising from under $0.70 at the beginning of the year to as high as levels above $0.77 last week. At 11:04 a.m. HK/SIN, the Australian dollar was fetching $0.7587.
But ANZ said it still expected the Aussie dollar to face serious headwinds. Its latest forecast is for the currency to fall below $0.70 in 2017's December quarter, before sliding as low as $0.66 by 2018's March and June quarters.
"We continue to think that the distribution of risks is to the downside and that this is simply a timing issue for our bearish view, rather than the beginning of a fresh cycle of strength in the Australian dollar," it said.