Herald Sun

Long, slow slide

An­a­lysts peg Aussie dol­lar at US72c by year’s end

- PAUL GILDER THE DOL­LAR WITH AAP paul.gilder@news.com.au

IT may be mu­sic to the Re­serve Bank’s ears but cur­rency ex­perts say the latest slide in the Aus­tralian dol­lar hasn’t changed the tune — we’re still liv­ing in the 70s.

As the Aussie plumbed depths not seen since May 2009, shed­ding about US0.8c to hover at US73.66c late yesterday, for­eign ex­change an­a­lysts said the de­cline would con­tinue, al­beit grad­u­ally.

The Aussie lost ground af­ter the Bank of Canada cut its cash rate for a sec­ond time this year, while New Zealand was left reel­ing af­ter global dairy prices plum­meted more than 10 per cent.

“The sit­u­a­tion (yesterday) is what we call a bit of guilt by as­so­ci­a­tion,” said Na­tional Aus­tralia Bank’s global co­head of for­eign ex­change strat­egy, Ray At­trill.

He said Canada’s rate cut was not un­ex­pected but the ex­tent of the de­cline in milk and cheese prices — a vi­tal sec­tor to the NZ econ­omy — was.

“Com­mod­ity cur­ren­cies as a bloc all got smoked, and gen­er­ally the US dol­lar has been a bit stronger since (US Fed­eral Re­serve chair­woman) Janet Yellen’s com­ments overnight.”

In her latest tes­ti­mony to US Congress on Wed­nes­day, the world’s most pow­er­ful cen­tral banker re­it­er­ated that Amer­ica’s near-zero bench­mark in­ter­est rate was on track to be lifted this year, most likely Septem­ber or De­cem­ber.

NAB has reined in its tar­get for the Aus­tralian dol­lar at the end of next June, from US73c to US71c, ex­pect­ing the RBA to sit tight this year and the Fed to take its time ris­ing off the floor. Other com­men­ta­tors were of a sim­i­lar mind.

“We’re now look­ing at US72c by the end of the year and US70c by March and June of next year,” Com­mSec chief economist Craig James said.

Those down­drafts would aid the com­pet­i­tive­ness of lo­cal man­u­fac­tur­ers and be enough to leave the cash rate at 2 per cent, Mr James said.

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