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Due to Increasing RBA’s Rate Cut Chances, Dollar Dips More

March 31, 2015

As a result of drowning commodity prices and a weak outlook for growth, the chances of rate cuts by RBA has increased. This thing also driving the local currency to a lower level.

The Australian dollar fell from US77.21¢ at 4pm AEDT Monday, down almost US1¢, to arrive at US76.34¢ at 4pm AEDT Tuesday. Over the past two trading sessions, the Aussie has dropped about 2.4 per cent.

ANZ Banking Group co-head of Australian economics Felicity Emmett said, “With few domestic drivers the Australian dollar followed the trends of the broad US dollar and weakened sharply”.

As per the forecasting by Westpac Banking Corp, “The dollar could hit as low as US75.90¢ on Tuesday. Over the next three months, the bank has set a downside target of US75¢”.

Also according to the forecasting by HSBC, “Australia’s official cash rate to hit 2 per cent in the second quarter of this year and stay flat until the third quarter of next year before rising”.

Mr Bloxham said, “As mining investment and commodity prices fall, Australia needs growth to shift to the non-mining industries. A record low RBA cash rate setting is helping to make this happen by supporting the most interest rate sensitive sectors of the economy“.

An improvement in business confidence is needed to address this gap, he said.

He further added, “Business confidence has been held back by a range of factors, including the lack of local competitiveness, due partly to a stubbornly high Australian dollar and lack of clear direction on fiscal policy in the post-mining boom period”.

News Source: http://www.smh.com.au/business/the-economy/dollar-drops-as-rba-rate-cut-chances-increase-20150331-1mbien.html

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