The Australian Dollar to US Dollar (AUD/USD) exchange rate clawed back some losses on Tuesday after falling to a five-and-a-half year low of 78.59 cents on Monday.
ANZ currency strategist Sam Tuck commented: ‘I imagine Governor Stevens is pretty happy with where the currency is going. When it was 85 US cents he said he’d prefer 75 cents, and now it’s halfway there.’
The Reserve Bank of Australia (RBA) is renowned for jawboning the currency in an attempt to get what it feels is a more reasonable exchange rate.
The ‘Aussie’ exchange rate hasn’t stood a chance against the bullish US Dollar as investors are pricing in rate cuts by the RBA. Some economists (including those at Westpac) have forecast an adjustment to the official cash rate after the Bank of Canada (BOC) recently performed a surprise cut.
Inflation is falling all over the world as the price of oil tumbles and the Canadian Dollar (CAD) exchange rate has been particularly affected by this.
Tuck continued: ‘I think like every other central bank, there’s a certain element of look-through in terms of the energy price.’
However, economists are concerned a global slowdown is taking place and fears that the Australian economy will stall are very prominent.
Olivier Korber commented: ‘The biggest structural concern for Australia and the currency is probably the landing of the Chinese economy amid falling commodity prices.’
However, as the Australian Dollar declines, speculation that the RBA will leave rates unchanged mounts.
Foreign exchange expert David Forrester commented: ‘The weaker Australian Dollar is easing monetary conditions for the RBA. The RBA would prefer to ease monetary conditions via the currency rather than having to cut rates and risk generating asset bubbles.’
The Australian Dollar may be able to continue gaining on Tuesday as US Durable Goods Orders took a surprising -3.4% slip. Excluding transportation, the orders on goods designed to last more than three months contracted by -0.8%.
The US still has Consumer Confidence data due out on Tuesday which could impact the US Dollar significantly; however, it seems unlikely that investors will take the Durable Goods Orders fall well as 0.6% growth had been forecast.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is presently trending in the region of 0.7948. The US Dollar to Australian Dollar (USD/AUD) exchange rate resides at 1.2592.
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