A bold statement from Deutsche Bank chief economist Adam Boyton has him predicting the Australian Dollar could fall into the 50’s vs the US Dollar in the next three years.
Mr Boyton, who early last year made the claim that the AUD/USD exchange rate could reach 0.66c by the end of 2015, was one of very few analysts to forecast such a drop when the AUD/USD rate was trading close to parity.
He also believes now that the AUD/USD could drop to 0.60c by the end of 2016. “I wouldn’t be surprised if the Australian dollar is printed with a ‘five’ handle in the next three years,” Mr Boyton said.
“As far as reaching a bottom, I don’t think we’ll know what that is until Chinese growth picks up, and our economy adjusts from the mining boom enough that the RBA will be considering raising rates. All of those things seem quite some distance away, and I don’t think the Australian dollar is likely to rise until at least 2017 or 2018.”
Yesterday provided a mixed result locally with our Trade Balance improving slightly, however still sitting a huge $2B+ deficit. Retail Sales figures fell to -0.1 percent in July, down from 0.7 percent in June.
Wednesday saw the AUD drop below 0.70c for the first time since 2009 after GDP figures released this week were the slowest since March 2013, coming in at 0.2 percent, lower than the predicted 0.4 percent.
In what has been another bad week for the underperforming AUD we have seen more poor data from China, with manufacturing data results in contraction and continuing to spark fears that the Chinese economy is not in good health.
The free fall in the local currency, which one year ago was trading at 0.935c has really reacted recently to China’s change in attitude towards their projects, which in turn has led to a huge slowdown in their construction industry and has put the crunch on the price of Iron Ore and most other commodities.
The Chinese are now only buying what they need instead of so much forward planning which has previously allowed Australia to supply copious amounts of Iron Ore to the world’s 2nd largest economy and has kept the local economy strong. We are now seeing the downside to our economy relying so heavily on the mining sector, and on China.
Overnight seen the Trade Balance from the USD released and come in at $-41.86B, slightly improved on last month’s figure of $-45.21B. We also had Jobless claims reported at 282K up from 271K and the USD ISM Non-Manufacturing Composite which came in with a score of 59.0, which was slightly above the expected result but below, last month’s figure of 60.3.
Friday evening will see the release of another raft of USD announcements and the AUD is waiting with bated breath to see if poor economic data out of the USD can keep it above 0.70c for now, and try and stop this recent free fall.
The AUD/USD Exchange Rate is trading at 0.7015 at 8:30am today.