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Dollars hits five year low

Jan 30, 2015

The Australian dollar has stunned foreign exchange markets after hitting a new five-and-a-half year low amid rising expectations of a local interest rate cut.

At 0700 AEDT on Friday, the local unit was trading at 77.55 US cents, down from 78.75 cents on Thursday.

On Friday morning it fell as low as 77.20 US cents – the currency’s weakest level since July 2009.

There is a growing expectation that if the Reserve Bank of Australia doesn’t cut the cash rate next week, it should at least indicate it’s open to a reduction sometime this year.

The prospect of an RBA rate hike has softened after the European Central Bank launched an economic stimulus plan, and interest rate cuts in Canada and Singapore.

Bank of New Zealand currency strategist Raiko Shareef said the Aussie is now one most underperforming currencies on the market.

“The Australian dollar’s fall over the past 24 hours has been nothing short of stunning,” he said.

“It has shed the bounce following Wednesday’s better-than-expected inflation report, which took it above 80.

“The weight of expectation around next week’s RBA meeting continues to mount, such that a nasty snapback beckons should the RBA fail to adjust its language toward an easing bias.”

The RBA holds its first board meeting of the year on Tuesday.

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