A lower Aussie dollar is widely forecast in the economics and business community as both a result of the fall in the terms of trade and a necessary part of Australia’s economic adjustment.
But since the early January crash to the low 75 cent region the Aussie dollar has been nothing if not resolute in its recovery from almost every setback. Two rate cuts, structurally weak GDP, falling terms of trade, relatively weak consumer confidence and an RBA with an obvious easing bias.
In itself that’s a problem for the economy going forward.
So news this morning that the Aussie’s post-FOMC meeting rally extended to 2 full cents last night on the back of more US dollar weakness will not be the news Glenn Stevens wants when he has his Weetbix this morning.
It back at 78 cents now after the euro ran into solid technical resistance and selling. That gave the US dollar a pause and the news that rumours of a Greek bailout were so far unfounded has knocked the euro, Aussie and most other currencies lower against the US dollar in the past few hours.
Westpac reckons the “actual” Fed tightening will be the game changer that the Aussie dollar needs to fall to the low 70s. But for now every fall meets new buying.