In late 2007 the foreign currency market started to feel the effects of the global economic crisis. After kicking off in the United States, the financial disaster had a domino effect in Europe and went on to seriously impact other countries already loaded with heavy financial burdens.
In the years which followed, significant currency market movement occurred (as any analysis of historical exchange rates would demonstrate) and no major currencies were left unscathed. That being said, the global economic crisis had America at the epicentre, and therefore the world’s reserve currency was at the heart of the predicament.
The US Dollar was severely affected by the financial crisis, which can be considered as beginning with the collapse of the Lehman Brothers expansive global bank in 2008. The fall of Lehman Brothers Bank (due to risky lending) combined with a prolonged period of low inflation levels and a savings glut in Asia helped feed the financial disaster. America required a massive amount of help to support its economy in the form of taxpayer bailouts. However, the nation couldn’t prevent the credit crunch or the recession that followed. The recession posed a threat to both large and small businesses and saw unemployment rise. The housing market had already suffered from the burst of the housing bubble in 2006, and additional repossessions and evictions helped the recession spin out of control. America is a prime example of how the economic status of a country can change dramatically in a short period of time. Its period of contraction was labelled the most severe since the Great Depression, which took place prior to World War II.
Although the ‘Aussie’ wasn’t as affected by the global economic crisis as some of its currency counterparts, almost every other major currency fell against the US Dollar in 2008/2009. The Australian Dollar fell to its lowest rate against the US Dollar in recent years (0.6390) in early March 2009, after a short lived climb out of a more major slump. Since then the ‘Aussie’ has predominantly risen against the ‘Buck’, reaching its highest point since the onset of the crisis (1.0945) in July 2011. However the ‘Greenback’ has gradually moderated, causing the Australian Dollar to ease back down.
During mid-2014 the ‘Aussie’ was regularly breaking through the 0.94 barrier against the US Dollar and economists have predicted that the Australian Dollar could reach parity with the US Dollar before the end of the year.