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Australian Dollar at Lowest Since 2016

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The Australian dollar really doesn’t have much going for it.

A 2.2 percent loss between Tuesday and Friday had the Aussie settling for the week at 71.9 US cents, which marked its lowest weekly close since December 2016, and it isn’t doing much better versus the euro, Canadian dollar, Swiss franc and Japanese yen.

Perhaps the last thing propping up the besieged Australian currency was a lingering hope that the Reserve Bank of Australia would raise interest rates sometime next year, but these hopes were dealt a serious blow on Tuesday after one of Australia’s “Big Four” banks, Westpac, made the decision to independently raise mortgage rates.

Westpac’s decision is likely to be copied by other Australian banks and will reduce the need for the RBA to increase Australia’s benchmark interest rate. It is the benchmark rate, not commercial lending rates, that are important for money market rates which in turn affect the Australian dollar’s value.

All eyes will now be on the RBA’s meeting on Tuesday, at which policymakers might sound more dovish.

Also on the economic calendar next week is Australian GDP data (Wednesday), for which last week’s awful quarterly capital expenditure figures don’t bode well. Expenditure fell in the second quarter by 2.5 percent, disappointing against the market forecast for growth of 0.6 percent and against first-quarter growth of 1.2 percent.

Given the prevailing environment, it would be of no surprise should the Australian dollar continue to weaken towards, and potentially below, the 70 US cents mark in the coming months.

 

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Posted to: News

 
 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

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