Higher US rates grim news for our dollar
THE Aussie dollar is likely to fall to about US70¢ by the end of the year in response to higher US interest rates and sliding commodity prices, UBS predicts.
The investment bank said the local currency had now reached a “fair value” at about the US75¢ mark but said further falls were likely in coming months.
“We continue to expect further Australian dollar/ US dollar depreciation ahead,” UBS said, citing falls in commodity prices and its forecast that the US Federal Reserve will raise interest rates in September and December as key factors.
UBS’s prediction came as the Aussie traded at about US74.20¢ yesterday morning, down from US74.69¢ on Friday but up from last week’s six- year low of US73.92¢ amid bad economic news from Greece and China. The dollar plummeted last week following three weeks of turmoil on the Chinese stockmarket, which has lost al- most 40 per cent or more than $ US3 trillion ($ A4 trillion) in value.
UBS said if the Australian dollar did move lower, it could contribute to a recovery in the economy’s non- mining sector where business investment has remained weak. The Reserve Bank has previously said it would prefer the local currency to be about US75¢ but some economists believe it will have to fall closer to US70¢ to boost growth.