The Australian dollar’s two-month rally may be nearing a peak, with top forecasters warning that bets on another Reserve Bank of Australia rate hike have gone too far. The Aussie will fall as much as 3.7 per cent by year-end, according to SB1 Markets AS. Banco Santander SA sees the currency at 70 US cents by year-end, while Danske Bank AS expects it to retreat to that level by as early as December.

The currency closed on Friday (Aug 28) at 71.64 US cents. Those bearish calls follow a more than 3.5 per cent gain since July as sticky inflation fuelled bets on a rate hike. Economic growth data due this week may test those wagers, with some analysts expecting no tightening from the central bank in the near-term.

Stuart Bennett, Santander’s head of Group-of-10 currency strategy, said the currency has been a strong performer in Q3 with ample scope for profit taking. Dane Cekov of SB1 Markets in Oslo noted that a resolution in the Iran war could weigh negatively on commodity-exposed currencies like the Australian dollar. Antti Ilvonen, a strategist at Danske Bank, said many tailwinds pushing the Aussie higher could soon turn around.

Technical indicators and seasonality favour a pullback, with the currency having fallen an average 1 per cent in September over the past five years.