SYDNEY: The Australian dollar Thursday fell to its lowest level against the greenback since August 2010 after the US Federal Reserve said it would scale back its stimulus programme next month.
The Aussie hit a low of 88.21 US cents after Fed chairman Ben Bernanke's announcement, but has since recovered slightly to 88.37 US cents. It was trading at 89.04 US cents on Wednesday.
LTG GoldRock director Andrew Barnett said the Australian dollar's fall was limited because a small tapering was largely expected, but he expects the local currency to remain under pressure.
"Once people realise that they're going to taper gently and slowly, with zero percent interest rates in the US and 2.5 percent in Australia, in my view, we're looking at the Australian dollar trading at 85 US cents (in the coming months)," he said.
"The fact is the Reserve Bank in Australia wants to see the Aussie down at 85 US cents and they're going to get their way."
Australian central bank governor Glenn Stevens last week said he wanted to see the currency at 85 US cents to help stimulate trade-exposed sectors of the economy.
A strong currency in recent years has squeezed the economy, eroding government revenues and pressuring industries such as manufacturing.
The US Federal Reserve plans to spend US$75 billion on bonds a month starting in January, down from the US$85 billion a month it has spent for a year in an effort to keep cash flowing into the economy to stimulate growth and jobs.
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