- AUD has been one of best performers in 2020

- But outperformance now at risk says FX strategist

- Agricultural sector at risk of China tariffs

- RBA discomfort with AUD/USD gains could soon emerge

- AUD/USD seen correcting lower, this would aid GBP/AUD and EUR/AUD higher

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GBP/AUD spot at time of writing: 1.8310Bank transfer rates (indicative guide): 1.7670-1.7800FX specialist rates (indicative guide): 1.7865-1.8150Access bank beating exchange rates hereThe Australian Dollar is prone to losses over coming months, according to new research from Rabobank.

The Dutch based multi-national bank have said the Australian Dollar faces significant headwinds from both the covid-19 induced slump and uncomfortable diplomatic tensions with China, which appears to be leaving the country's agricultural sector exposed to tariff hikes.

Rabobank also warn the Reserve Bank of Australia (RBA) is another potential hurdle to further currency appreciation as they will become increasingly uncomfortable with further strength in the currency, particularly against the U.S. Dollar.

"The RBA is unlikely to welcome further significant gains for the AUD given risk to the economy," says Jane Foley, Senior FX Strategist at Rabobank.

The Australian Dollar has been one of 2020's better performers, rising 2.5% against the U.S. Dollar, 2.75% against the British Pound and 5.75% against the New Zealand Dollar.

There are a few key drivers behind this outperformance:

1) The Aussie Dollar retains a high 'beta' with global risk, particularly the S&P 500, i.e. it has a strong positive correlation that means when stocks are rising, so too is the Aussie. And, the S&P 500 just hit an all-time high in the past 24 hours.

2) The price of Australia's main commodities are strong, particularly that of iron ore which is the country's main export. However, LNG, which is another major commodity export has also rallied sharply over the past month

3) The Reserve Bank of Australia has been one of the least aggressive amongst the world's leading central bankers, doing enough to support the economy but not quite enough to substantially lower Australian bond yields to the detriment of the currency.

"The fact that the RBA is considered to be perhaps the least dovish central bank in the G10 universe is a factor behind the AUD’s solid position," says Foley. "The RBA’s refusal to consider pushing rates below the 0.25% level is in particular contrast to that of the RBNZ where negative rates are being discussed."

The RBA will however be crucial to the Australian Dollar's outlook, with Foley warning it could become increasingly uncomfortable with the Aussie Dollar's 2020 rally.

A strengthening Australian Dollar means the price of Australian exports rises, which in turn makes them less attractive on international markets. Or, put another way, exporters who receive U.S. Dollars will see their relative earning power decrease once the proceeds of their sales have been converted back into Aussie Dollars.

This is a risk to the economy that the RBA might soon reference in future policy meetings, which could induced some nerves into Australian Dollar exchange rates.

China is another concern as the country appears to be flexing its muscle on the global stage, having been stung by criticism of its handling of the early stages of the covid-19 outbreak.

China has identified Australian agricultural goods as a soft underbelly to exploit, and has in 2020 already placed tariffs on Australian barley while also barring some meat exports on technicalities. This week Australian wine was on China's tariff menu, as they accused the Aussies of dumping cheap wine onto the Chinese market.

"The timing of the announcement is a cause for concern," says Foley. "While the strength of iron-ore prices this year has been a comfort for some Australian exporters, the agriculture sector is nervous that it might be an easier target given speculation that mining exports could be protected by the importance to China of its domestic steel industry."

The threat of tariffs comes as Australia's economy is already suffering the effects of the covid-19 lockdowns, with the reintroduction of lockdown measures in Victoria sapping the energy out of a nascent economic recovery.

The risks to the economic outlook therefore look sizeable and the RBA could well make its discomfort clear at future policy meetings, which could undermine the AUD.

Rabobank is meanwhile of the opinion that the recent sell-off in the U.S. Dollar is stretched, and some recovery potential is in store.

As such, "AUD/USD has room to correct lower in the months ahead," says Foley.

A lower AUD/USD exchange rate would in turn be reflected in other crosses, as such the Pound-to-Australian Dollar exchange rate could see further upside potential, as too would the Euro-to-Australian Dollar rate under such a scenario.

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However, the view that the Aussie Dollar's period of outperformance is drawing to a close is not a widely held one in the analyst community.

Australian lender NAB this week released their latest assessments of the foreign exchange market and told clients they expect any Australian Dollar weakness to be shallow and the currency's 2020 bull market to remain intact.

Underpinning expectations for a robust Aussie Dollar going forward is the ongoing global recovery story - particularly that of China - and policy support that has underpinned a strong recovery in stock markets, to which Australian Dollar performance remains positively correlated too.

In addition, expectations for further support out of China via strong demand for Australian commodity exports remain intact.

"The infrastructure-heavy China recovery story and what that means for key Australian commodity export prices remain part of the forecast narrative," says Ray Attrill, Head of FX Strategy at NAB. "Nothing in the latest China economic data gives pause for re-assessment at this juncture."