The Australian dollar has dropped to its lowest level since October with many people becoming put off by the country’s outlook. The currency fell down to 63. US cents 2 in early trading on Wednesday, the weakest level that the currency has been since November 2023.
Experts say that the decline is due to such causes as a worsening of the Chinese economy being the largest trading partner of Australia as well as possible central bank rate cuts in Australia in the next months.
A low customer confidence rate and lower than expected retail sales have also been evidenced in recent data that have borne a negative effect on the outlook.
Australian dollar ‘under pressure from internal and external forces,’ said Sarah Chen, a currency strategist at the ANZ Bank. Indeed, the current deceleration in China’s property and beyond has put significant pressure on commodities, something that Australia’s resilient economy that heavily relies on its resources does not need.
The RBA left the interest rates unchanged in its Sep meeting and more so after the recent comments made by Mr. Philip Lowe, thus fueling further speculation regarding rate cuts in 2025. This is a departure from what the US Federal Reserve has been indicating it will follow a policy which will hold rates higher for longer, thus increasing the interest rate gap between the two countries.
The Australian dollar will fall which may increase the import prices and exacerbate the inflation rate further. On the other hand, a weaker currency may somewhat help exporters and tourism industry especially as Australia turns into one of the favored foreign destinations.
