Dollar in trouble as slide mooted

THERE is a good chance the Aussie dollar could continue sliding and fall below US70¢ in the new year.

The currency was trading at US81¢ last January but has dropped 13 per cent since then, losing 5 per cent of its value in December. It is now hovering at its lowest point in three years, trading late yesterday at US70.65¢.

Market analysts attribute the downward movement to a range of factors, including wild swings on global share markets along with weaker prices for crude oil and base metals.

Softer economic data from Australia, US and China has also put pressure on the dollar, along with trade tensions between the US and China.

Westpac research analyst Bill Evans had originally forecast the Aussie dollar to hit US70¢ by mid-2019 but it fell “at a much faster pace than we had envisaged’’. He now predicts it will sink to the mid to high US60s in 2019.

Mr Evans said the key drivers of the change had been Australian interest rates falling much further below US rates than had been expected, a slowing world economy, Australia’s housing market correction and political uncertainty ahead of the federal election.

Commsec chief economist Craig James thinks the dollar will hover closer to US75¢ this time next year. “In terms of the Aussie dollar, we think the US Federal Reserve is getting closer to pausing in the rate hiking cycle,’’ Mr James said.