The Australian dollar is now worth only 68.6¢ after another week of heavy losses, and now one senior analyst has predicted exchange rates in the “mid-60s” this year – rates not seen since 2009.
The past month has been a shocker for the Australian dollar and recent days have only cemented expectations for an even weaker currency.
Election jitters, a stuttering domestic economy and elevated trade tensions between the world’s two largest economies helped drive last week’s fall from US70¢ to 68.6¢ — an exchange rate that marks a 3-year closing low and takes us towards Westpac’s year-end AUD forecast of 68¢ with more than half a year remaining. A month ago, the Aussie bought 72.1¢. In early 2018, it bought more than 81¢.
Now, following a jump in Australia’s unemployment rate to 5.2 percent, from 5.0 percent, derivatives markets have moved to price in a near-60 percent chance of an interest rate cut by the RBA next month, which seems entirely reasonable given the RBA’s concluding remarks on May-7, which implied that any increase in unemployment above projected levels would see a policy response. “The Board will be paying close attention to developments in the labour market at its upcoming meetings,” the RBA said. The RBA also said at the time that it expected unemployment to “remain around [5 percent] over the next year,” which obviously hasn’t panned out.
Per the Sydney Morning Herald, one senior investment advisor and former head of bond trading at BlackRock, GSFM’s Stephen Miller, has made “something like the mid-60s a reasonable target” for the Australian dollar. Since 2009, the Aussie hasn’t been valued at anything less than 67.4¢.
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