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The Australian Dollar will remain under pressure and won't shake its laggard status until China's economy puts its skates on.

This is according to a new analysis from Goldman Sachs that expects the Aussie Dollar to remain "under pressure" even if the Reserve Bank of Australia (RBA) raises interest rates again in November.

In a regular weekly currency briefing, analysts at the bank say year-to-date AUD has been the worst-performing currency in the G10, apart from the Yen.

"While returns have flattened out over the past couple of weeks, AUD/USD has deeply underperformed our models since the start of the year," according to the analysis.

Goldman Sachs's short-run BEER model suggests that AUD/USD should be at levels closer to 0.70, yet the spot exchange rate has hovered around 0.65-0.64 for the past month or so.

"We suspect that the underperformance relates to China weakness, which tends to weigh on AUD most heavily among the G10," says Goldman Sachs.

The Australian Dollar has nevertheless outperformed the likes of the Pound and Euro since August amidst an improvement in sentiment towards China that gives a sense that peak pessimism towards Australia's main trading partner has passed.

Analysts at Goldman Sachs note an improvement in Australia's terms of trade over this recent period, "which had been weakening for much of the year, and the real CNY seeing some recent support."

Goldman Sachs is meanwhile pencilling in a further potential interest rate rise from the RBA in November which is underappreciated by markets and therefore offers some potential support for AUD.

"Greater hawkishness from the RBA could add support to the currency," says Goldman Sachs.

Above: AUD is one of 2023's laggards. Chart shows AUD relative performance against G10 peers.

The RBA left interest rates unchanged on October 03 and maintained previous guidance, with the new governor Michelle Bullock apparently not wanting to make a mark on policy too soon in her tenure.

Accordingly, market pricing for a November rate move remains relatively soft.

But even if the RBA does surprise and proceed with another hike, Goldman Sachs expects it to confer limited upside on the Aussie.

"We think that negative sentiment on Chinese growth should continue to weigh on AUD for the time being. This is especially true if the recent support in Australia’s terms of trade turns around with weaker iron ore prices, as our commodities strategists forecast," say analysts at the Wall Street bank.