It’s China’s economy that is currently dragging down markets and the Aussie dollar. In December, Chinese exports were down a whopping 4.4%. That’s the country’s biggest fall in close to two years. And it wasn’t…
Everything you need to know about the Aussie Dollar
Over the past two decades, the Australian dollar has been as low as 48 US cents and as high as US$1.10.
Currency movements occur for many reasons.
Different interest rates between countries are a major factor. Flow of funds also play a big role, meaning that if more money is coming into a country than going out, it can have a large effect on that country’s currency.
For a resource-rich nation like Australia, which tends to sell raw materials to the rest of the world while importing finished goods, the prices of commodities are extremely important for our currency.
The Australian dollar’s fall from US$1.10 to the mid-70 US cent range was largely due to the end of the mining boom in 2012. Since then, the Aussie dollar has remained relatively strong. That’s due to Australia’s interest rates being marginally higher than other countries, and the perceived strength of the Australian economy.
Trouble on the Horizon for the AUD?
However, the Australian dollar is also subject to setbacks in the financial and political climate. Threats of a potential trade war between the US and China left the Australian dollar caught in the middle in early 2018.
It is often unclear what effect these sort of international trade conflicts will have on our economy in the long term. Some analysts argue that tariffs imposed by the US and retaliatory measures taken by China could herald a positive net effect for Australia, if China replaces US goods for Australian exports.
Others argue that any instability in our two biggest trade partners can’t help but lead to instability for us. The strength of the Australian economy depends on high commodity prices and on the strength of both the US and Chinese economies.
One positive of a weaker currency is the stronger demand for Aussie exports. Demand for natural resources from China and India has pushed the Aussie dollar higher in times of demand.
But this positive can be counterbalanced by our need to import many goods that Australia does not, or cannot, manufacture alone. The death of Australia’s car manufacturing industry, for example, could leave us vulnerable to a weakened Aussie dollar.
Understanding the prospects for the Australian dollar is crucial to investors with direct currency exposure, those holding gold and other precious metals (which are typically priced in US dollars) and investors in international shares.
Here at Markets & Money, we keep you up to date with all the latest factors influencing the Aussie dollar. Below you can find all the latest articles from our editors on this topic.
Recent volatility for the Aussie dollar has been set off by conflicting reports about a trade deal with China, with an article by the Wall Street Journal setting off a sharp spike in our currency.
At one point recently the Aussie Dollar was trading at .683. So what explains the most recent dip?
Yesterday, the Federal Reserve raised the benchmark interest rate by 25 basis points to a target range of 2.25–2.5%. As a result, the Aussie dollar promptly slumped.
It’s been a strange two months for the Aussie dollar, and the outlook is shaping up to be increasingly negative. After reaching as high as $.7355 yesterday, it is now trading at .722, and the…
With the Aussie dollar currently trading at 73 US cents, you would be forgiven for thinking our currency is doing well.From the start of November it has been climbing upwards, despite recent volatility. But there…
After news filtered through that the Democrats would gain control of the House, the Aussie dollar continued its edge upward, now trading at US$0.728. The really interesting angle here is that there may be bipartisan…
The Australian dollar has shot up to 72 cents against the US dollar, on the back of positive news from the Australian Bureau of Statistics (ABS).
The Aussie dollar is getting smashed by most major currencies as the US posts some of its strongest results in the past 21 years.
The Aussie dollar steadied today around 72.5 US cents after a period of volatility yesterday. Perhaps markets had already priced in the Federal Reserve’s move to raise interest rates by the time it was officially…
A few months ago we wrote about how the Aussie dollar would fare over the next six months. Well, it looks like we were right. From a low of 70 cents, the Aussie dollar has…
Borrowing in their own currency is less risky, as the government can pay off the debt by starting up the printing presses. Yet it is often easier to raise money in a foreign currency, in…
As it stands, the biggest impacts set to drag the Aussie dollar down is China’s economic slowdown and the US overheating.
Higher mortgage rates will mean that households face higher mortgage costs, which could decrease savings growth even more. Higher rates with no wage growth could also mean that borrowers applying for new loans face higher…