The market is rushing to reassess its outlook for the Australian dollar after its rapid descent to a nine-month low, as pundits warn the sell-off could intensify amid continued signs of stress in the Chinese economy.
“The fall in the Aussie has been more rapid than we had expected, but we’re not surprised by its continued downtrend given the deterioration in the global and Chinese economy,” CBA currency strategist Carol Kong toldNational Australia Bank’s foreign exchange team said on Friday that it had placed its currency forecasts under review due to the “fast-moving market developments”. Until now, NAB had a long-standing view that the Aussie would rise to nearly US70¢ before the end of the year.
However, Mr Joiner said it was more concerning for discretionary retailers given businesses would be paying more at the docks at a time when they were already struggling to pass on higher costs to consumers.as consumers grapple with the rising cost of living. Petrol prices are also hovering at the highest level in more than a year, with the average price for regular unleaded fuel in Sydney hitting 213.6¢ per litre this week, according to the NRMA.
An additional drag on the currency has been the interest rate differential between Australia and the US. The RBA cash rate sits at 4.1 per cent while the US Fed Funds rate is at a range of 5.25 per cent to 5.5 per cent.