The Australian dollar fell sharply against the US dollar today on the end to quantitative easing and continuing low interest rates.
A further weakening in Australia’s terms of trade index and flat new homes sales also kept the Australian dollar down to 0.8774 US cents, down about 0.24%.
The ending of US quantitative easing is a positive for Australia, according to Shane Oliver, chief economist at AMB Capital.
“It’s another sign the US economy is on its feet again and a stronger US is good news for Australia as it means a stronger global economy,” he says. “Second, it removes a source of upwards pressure on the $A, allowing it to continue its downtrend.”
Oliver sees the dollar likely to fall to around 80 US cents over the next year or so.
“This will help the Australian economy rebalance as the mining boom fades,” he says.