The Australian Dollar set a new 6 year low versus the US Dollar on Wednesday. Another poor day for the Australian Dollar (AUD) has seen the AUD/USD exchange rate drop as low as 0.7384 and the AUD/GBP exchange rate drop to 0.4785p. In addition the Iron Ore price has dropped for a 9th consecutive day and to its lowest level in three months, dropping below $50/tonne.
Capital Economics Australian economist Paul Dales said: “Looking ahead, both our forecasts for the iron ore price and Australian interest rates are consistent with the Australian dollar weakening further against the US dollar.” If the iron ore price were to fall from US$52 a tonne now to US$40 a tonne by December, then the Australian dollar may weaken to around US70¢.
“Meanwhile, if we are right in thinking that the RBA will cut rates to 1.5 per cent [from 2 per cent now] and leave them there while the US Fed steps up the pace of [interest rate increases] next year, an Australian dollar rate of around US65¢ is possible”.
As I mentioned yesterday, the problems in China should be far more of a worry to Australians rather than the Greek exit scenario. OANDA Australia and Asia Pacific senior FX trader Stephen Innes said with all the global attention on the Greek crisis, China continues to be the elephant in the room. “Regionally I see China as a much bigger issue than Greece and we’re seeing this play out on currency markets, Iron ore, copper and oil remained under pressure on the back of increasing trader anxiety about (China),” he said.
Today sees the AUD best chance of gaining back some ground against the other currencies with important announcements both locally and from China. Domestically we have the Australian Unemployment figure released today which is expected to move from 6% in May to 6.1% in June. Then Chinese CPI figures will be released and that is expected to grow from 1.2% in May to 1.3% in June. These announcements look like the only chance of the AUD seeing any short term recovery in what has been a very tough few weeks for the Aussie.
The AUD/USD Exchange Rate had gained back some ground to be trading at 0.7426 as of 08:30am while the AUD/GBP Exchange rate had also lifted back above 0.48 to be trading at 0.4830 this morning.