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One of the world's most important foreign exchange dealers sees healthy demand for Aussie Dollars.
Citibank, the world's biggest prime dealer of FX, says its data shows strong demand for the Australian Dollar at a time of easing global trade tensions.
The findings speak of ongoing demand for the currency and open the door to further outperformance.
Image courtesy of Citi.
"AUD experienced significant buying from real money investors this past week, where such inflows were the largest dating back several years," says a note from Citi released midweek, detailing developments in the bank's internal FX flows data.
"Given Australian investors’ holdings of US assets, it’s possible that adjustments to hedge ratios have contributed to such AUD buying," says Citi. "The broader risk backdrop has also been supportive in that we are likely past peak tariff risks, which could mean incremental progress towards US/China negotiations."
Investor sentiment received a shot in the arm midweek when China confirmed talks with the U.S. were to commence in Switzerland this weekend.
U.S. Treasury Secretary Scott Bessent will attend the talks, saying "my sense is this will be about de-escalation," Bessent said in a televised interview following the announcement of talks. "We’ve got to de-escalate before we can move forward."
The Australian dollar has outperformed global peers through the second half of April and into May as it recovered from a sharp selloff in early April when markets baulked at Donald Trump's tariff announcements.
According to Citi, progress towards US/China negotiations "can lead to rate cuts getting priced
out of the RBA and serve as another tailwind to AUD."
Trump said on Thursday that the U.S. had reached a trade deal with the UK and it would be the first of many.
The news bolstered global sentiment and shores up bets that the Aussie Dollar is primed to benefit from good news on trade.