SYDNEY: The Australian dollar could be about to drop below US80c for the first time in almost six years.
That’s the forecast from ANZ, which on Thursday declared the dollar is spending its final days above the US80c mark, suggesting expectations of future interest rate cuts could push the currency lower.
ANZ says two key pieces of economic data next week could tip the dollar across the line, with the currency likely to drop to around US76c by the middle of 2015.
“Should next week’s business confidence and CPI (inflation) numbers look as soft as we anticipate, a more sustained RBA easing cycle will be priced, and the AUD will break through US80c,” ANZ senior FX strategist Daniel Been said on Thursday.
The Australian dollar has not been below US80c since mid-2009 and has been as high as $US1.10 in recent years.
But it’s been sliding slowly for more than a year due to falling commodity prices and a stronger US dollar.
It dipped below US81c on Thursday in the wake of a surprise interest rate cut in Canada, which added to expectations the RBA would follow suit at its February 3 meeting.
The dollar’s drop in value has been good news for Australian exporters but bad news for anyone travelling overseas or buying imported goods.
It’s next moves are expected to be in reaction to National Australia Bank’s closely-watched business confidence survey on Tuesday, while the Australian Bureau of Statistic’s December quarter inflation figures are due out on Wednesday.
The inflation figures in particular, are shaping up as the key data to watch, with most economists tipping the annual inflation rate to come in below two per cent, with underlying inflation towards the lower end of the RBA’s two to three per cent target range.
That could give the RBA not only room to cut rates, but a reason to do so, if recent moves from international central banks are any guide.
Concerns about low inflation or deflation have prompted a strong of central banks to cut rates recently, while the European Central Bank is widely tipped to start a massive bond buying program in an effort to push up pries.
The RBA has kept the cash rate on hold at 2.5 per cent since August 2013.
