Why the Australian dollar is down to new lows as Trump’s trade war takes a toll
Posted September 07, 2018 16:50:16 Falling U.S. crude prices have made the dollar look more attractive than it actually is, which has put a squeeze on the Australian economy.
The Australian dollar was trading lower at 98.50 US cents US on Monday, down from 98.79 US cents earlier this week.
While the dollar index is down slightly since the start of the year, it remains one of the most volatile currencies in the world.
“The dollar has fallen a bit in value over the past week or so, so it’s still in a good position to be a bargain currency at the moment,” said Andrew Loughran, head of research at the Australian Commodity Futures Trading Commission.
The price of the greenback has dropped since early August, with the US dollar index dropping nearly 20 per cent in the past month, to a record low of 89.83 US cents, according to data from data provider Commodities Futures Group.
Commodities are betting on a weak U.K. Brexit, the start to the end of a new presidential term and other factors, including the election of President-elect Donald Trump.
In a statement, the Commodites said the currency is expected to recover to $US70.70 on October 9.
Futures markets have been bullish since the end-March, when the global economy started to turn around after the Brexit vote, and the central bank announced its own interest rate cut in March.
There are a number of factors that are weighing on the economy, with global oil production and exports down, and a rise in the number of people looking for work, Loughrun said.
Some people are already having to go back to school and the government’s job creation plan is looking weak, Lougran said.
“We’re seeing a lot of people not looking for the work, which is going to have a big impact on the economic activity in the country,” he said.
The Reserve Bank has raised the official unemployment rate to 4.6 per cent, but the number still falls well short of the 6.5 per cent needed to stimulate the economy.
Investors are concerned about the country’s growth prospects and the prospect of a Brexit, and fears of a U.N. trade deal being struck, with Beijing weighing in on the talks.
Chinese President Xi Jinping has also been making a series of speeches in the U.H.S., which have stoked speculation about a possible trade war.
Analysts believe Trump will be less inclined to take a hard line with Beijing in his talks with Chinese President Xi.
Australian dollar futures have been volatile in recent months.
On Monday, the currency fell 0.5 US cents to 97.68 US cents and was up 0.3 US cents in the afternoon, the lowest level since early July.
It also slid 0.6 US cents overnight to 97 US cents.
Australia’s main benchmark index, the S&P/ASX 200, is up 0% since April 27.