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"The brakes may be coming off the Aussie" - Deutsche Bank.
The Australian Dollar stays an attractive 'long' bet with strategists at Deutsche Bank, the global investment bank and lender.
Strategists turned bullish on the Aussie in May, and subsequent outperformance has rewarded the shift: over the course of the past three months the Australian Dollar is one of the best-performing of the world's major currencies.
Prompting the call was the belief that drivers were turning supportive of AUD, these include improved domestic fundamentals and waning outflows of capital by domestic funds seeking exposure to foreign equity.
"The worst had passed for China and broader risk sentiment, and the domestic Australian economy looked sound, with some fresh green shoots," says Lachlan Dynan, Macro Strategist at Deutsche Bank.
Having cut back at the start of the year, global reserve managers might be showing increased appetite for the Aussie again, Deutsche reckons.
Part of the reason could lie with the passing of risks associated with Donald Trump's tariff agenda: since April, the market has steadily been of the view the worst is in the rear view mirror, and subsequent deals and position shifts by the White House have confirmed this to be the case.
Analysts fretted the AUD would be amongst the most exposed to a messy trade war, meaning its resolution will benefit it.
"AUD exposure has looked more attractive in a world looking for dollar alternatives, given the strong credit rating, reasonable yields and good liquidity," says Dynan.
Domestically, appetite for foreign equities amongst Australian Superannuation funds appears to be waning, according to U.S. TIC data for April and May.
This would imply less appetite to convert Australian Dollars into foreign currencies to make the purchases, ensuring flows are also supportive of the improved fundamentals.
"Australia bought a lot of US equities from mid-24 into 1Q25, but that's dropped away in Q2" - Deutsche Bank.