What does Russia’s invasion of Ukraine mean for the Australian dollar? The aussie fell as global risk aversion surged but remains well inside this year’s trading ranges. A range of factors are at play in limiting the impact on the AUD but of course, this could change in coming weeks, economists at Westpac report.

Australia’s key commodity prices continue to lend support

“So Russia’s attack on Ukraine is hurting global risk appetite, most obviously equity prices, a clear negative for the aussie, but is supporting energy and metals prices, bolstering AUD commodity price support. We also need to consider any potential implications for economic growth and inflation, most notably from the jump in energy prices.”

“We forecast AUD/USD to struggle into mid-2022, given the Fed’s expected tightening cycle contrasting to a cautious RBA.” 

“Russia’s attack on Ukraine adds to the headwinds for global risk appetite, reinforcing our 0.70 forecast for June 2022. However, we see RBA tightening from August 2022 and a softer US dollar helping the AUD/USD to 0.73 by year-end.”