The Australian dollar to US Dollar (AUD/USD) has dropped to a new six-year low ahead of local unemployment data.
At 0630 AEDT on Thursday, the local currency was trading at 75.82 US cents, down from 76.05 cents on Wednesday. It had fallen to 75.61 US cents during offshore trade, its lowest level since May 2009.
The jobless rate hit a 12-year high of 6.4 per cent in January and today’s announcement on February’s employment rate could see further impact on the dollar. More than a dozen economists surveyed by AAP expect Thursday’s figures to show the unemployment rate falling back to 6.3 per cent in February. However, overall most senior economists believe the Unemployment rate will remain steady at 6.4%.
This is despite more than 15,000 jobs being created during this period. Conversely a surprisingly bad result could see the Australian dollar tumble closer to breaking 75 US cents.
Meanwhile, the Reserve Bank of Australia (RBA) has continued to talk down the local currency, with the central bank’s assistant governor Christopher Kent yesterday stating that while the 20 per cent depreciation in the currency from its 2013 peak has aided the economy, more falls are needed to strengthen the overall economy.
“While the depreciation seen to date will be helpful, our assessment is that our exchange rate remains relatively high given the state of our overall economy,” he said.
This again points to the overall thought that interest rates are set to be cut again next month (April).
Greenback gain continues Australian dollar’s pain
The strength of the US dollar has also weighed on commodity prices, which has put further pressure on the Australian dollar. The US dollar surged to fresh eleven-and-half-year highs on stronger-than-anticipated economic data against the Euro, after the European central bank launched their massive bond buying stimulus.
Investors and analysts were forecasting 235,000 increase in newly-added jobs in the US, so the 295,000 comfortably surpassed expectations. Non-farm payrolls were also better than expected, sending the US dollar up and the Australian dollar spiralling.
This augers well for the US economy although some economist are worried that the speed of the US Dollar’s rise could put pressure on US Exports.
Chinese Industrial data showing more signs of weakness
The overall slowdown in China is the worst case scenario and could really further weaken the Australian dollar.
In relation to Industrial data and output, factories have been hit by overcapacity, high inventories and tight financing through January and February economists said.
If Industrial data for Australia’s biggest trading partner proves worse than market forecasts and continues to grow below forecasts of 7.7 per cent annual growth, the sentiment will continue to worsen for the Australian Dollar (AUD).