Investors have long viewed the Australian dollar as a bet on global economic growth. The fifth-most traded currency in the world, “the Aussie” tends to rise when investors’ spirits are buoyant, commodity prices are high and sharemarkets are booming.
‘You get that thirst for US dollars and US dollar assets when it looks like the world is going to hell in a handbasket. I would say the Aussie dollar, to some extent, is a mirror image of that.’But for all the economic uncertainty in the world, the currency’s slump is happening at a time when on many measures, our domestic economy is in solid shape.
Outside the US dollar, however, the picture is much more mixed. The Aussie dollar is actually higher than it was this time last year against the euro, the yen and the pound. This distinction may sound arcane, but it’s important for assessing how the weaker dollar will affect the economy - in particular its impact on inflation, as alluded to by Chalmers.
As a result, Aird is not too worried about the falling Aussie dollar and says the bigger domestic concern is how households respond to higher mortgage repayments.
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