2018.04.3000:28:00UTC+00Australian Dollar to Drop Another 72 Cents in 2018 - Goldman

The Australian dollar is on track to fall another five percent in 2018 as the central bank stays on hold while the Federal Reserve keeps hiking interest rates, according to Goldman Sachs Asset Management.

The Aussie will fall to 72 U.S. cents by year-end as restrained economic expansion and inflation mean the Reserve Bank of Australia will take a “few years" to catch up with the U.S. Federal Reserve in raising borrowing costs, said Philip Moffitt, Asia-Pacific head of fixed income in Sydney at the firm, which oversees over $1 trillion.

The yield premium that Australian bonds enjoyed over Treasuries from 2000 swung to a discount this year, as disappointing economic data pushed back expectations for the RBA to hike rates while U.S. policy makers moved ahead. The Aussie is on track for a third month of declines, and is the second-worst performer among the Group-of-10 peers in 2018.

The Aussie has fallen over three percent this year against the dollar, weighed down by concerns that a trade dispute between the U.S. and China will affect demand for its iron-ore exports. Prices for the steelmaking ingredient have also lost 14 percent this year.

Australia's central bank has held interest rates at a record low of 1.5 percent since August 2016 to boost expansion. Employment rose less than forecast by economists in March, and the RBA has said it expects inflation to reach its 2-to-3 percent target only gradually.