The Australian dollar has plummeted to below 67 US cents for the first time in 10 years, and it could go even lower!
This comes after the Reserve Bank of New Zealand followed in Australia’s shoes and unexpectedly slashed their interest rates. The cash rate was cut to a record low of one per cent, however, it was done very swiftly and dramatically.
Commsec Chief Economist, Craig James, suggest that the Reserve Bank of New Zealand was worried about the nations slow economic growth pace as the United States continually engages in the Trade War with China.
“Growing global trade tensions and weak business and consumer confidence have weighed on economic growth.”
Both New Zealand and Australia are the slowest that they have been in a long time, with New Zealand’s Economy growing at 2.5 percent, the weakest it has been since 2013, and Australia’s growth pace of 1.8 percent, the slowest it has been since 2009.
The Australian dollar to plunge on Wednesday afternoon to 66.88 US cents, which is the lowest it has been since March 2009, which was at no surprise during the global financial crisis.
The Reserve Bank of Australia is also expected to cut interest rates two more times come mid 2020, which will take the cash rate to just half a per cent.
“The move lower in key commodity prices combined with the fact you’re also seeing a dovish RBA certainly builds the case for a lower Aussie dollar in the near-term. Our forecast is for it to go into the mid-60’s which is not too far from where we are now.” Tom Kennedy, JP Morgan Senior Economist told Daily Mail.
For those who are considering an overseas holiday, or are already booked to go, this comes at a very bad time. With the Australian dollar so weak this makes overseas holidays and imported goods more expensive, and it could only get more expensive if the dollar continues to drop lower.
The problems do not stop there, gross domestic production is slowing, the benchmark S&P/ASX200 plummeted by another 2.4 percent, or 162 points, marking the biggest one day fall since last year and wiping our gains made since June.
At the start of the week on Monday and Tuesday, the Australian Securities Exchange lost $83 billion, only a week after reaching an all time record high.
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