The Australian dollar fell sharply yesterday to levels not seen since the dying months of the GFC in 2009 after the Reserve Bank’s June board meeting minutes made it clear there would be more rate cuts to come.
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Several positives suggest recession is unlikely: the current account deficit has collapsed; the $A helps stabilise the economy; the drag from falling mining investment is over; there is scope for extra fiscal stimulus; infrastructure spending is booming; there has been no sign of panic property selling; economic policy remains sensible; population growth remains strong; and the RBA can still do more.
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Long the “commodity currency” ANZ Bank economists note the Aussie dollar is no longer being supported by commodity prices as has typically been the case.
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Given the downside risks for the $A and that being short the $A is a good hedge against threats to the global outlook it still makes sense for Australian investors to maintain a decent exposure to foreign currency via un-hedged global investments.
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ETF Securities’ ZUSD ETF offers investor a cheap and effective US Dollar currency play. ETFS’ Head of Sales, Kanish Chugh, tells Informed Investor more.
Read MoreToday’s national accounts for the three months to December are not expected to be brilliant. In fact, at best they could be between 0.2 percentage points to 0.4 – while some pessimists believe the reading could be a negative 0.1 because of the weakness in household income.
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New Zealand’s Reserve Bank has followed its Australian counterpart again in not moving its key interest rate.
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More evidence that parts of the Chinese economy are slowing as sluggish demand takes hold with producer price inflation posting the slowest rise in five months in September.
Read MoreChina’s central bank has cut the reserve requirement ratio for most commercial banks for the 4th time in 2018 as it seeks to offset the slowing pace of economic activity.
Read MoreIn recent days the Australian dollar ($A) has undertaken a marked depreciation against the US dollar ($US). It remains to be seen how far this will continue, but most commentators (including Clime) have long been suggesting that a significant adjustment is on the cards.
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