FXStreet (Edinburgh) - Kristoffer Lomholt, Analyst at Danske Bank, expects the Aussie dollar to grind lower towards the 0.68 handle in a 12-month horizon. Key Quotes “While the AUD in recent weeks has gained on improved risk sentiment and reduced China-worries we still expect more AUD/USD downside supported by both a weaker AUD-leg (terms of trade chock weighing) and a stronger USD-leg”. “Importantly, we do not see a RBA rate cut as a prerequisite for further AUD/USD-weakness. In our view the significant drop in the currency over the last year will be a sufficient cushion against lower Chinese demand and currently we do not pencil in further rate cuts”. “As a result we expect a re-pricing of Australian monetary policy (more than a full cut priced on 12M) together with speculative short-covering to counter some of the AUD/USD downside potential”. “In light of the recent AUD-support we lift our 1M projection to 0.71 (from 0.70) but leave our 3M, 6M and 12M forecasts unchanged at 0.69, 0.68 and 0.68, respectively”. For more information, read our latest forex news.