Long, slow slide

Analysts peg Aussie dollar at US72c by year’s end

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.