Australian dollar in trouble

The Australian dollar is once again under pressure today, sitting at its lowest level in 3 months against its US counterpart and it may be in for further losses with a possible rate cut from the RBA in the nearest future.

Last Friday Reserve Bank of Australia board member Ian Harper said he wouldn’t rule out a rate cut on the back of disastrous retail sales figures and current inflation numbers that sit well below the RBA’s target rate.

“The RBA is now stuck in limbo. It has a mandate to maintain price stability, to keep inflation under control. Normally, that means acting ahead of the curve, whacking up rates before inflationary pressures build,”said ABC Business Editor Ian Verrender

“Not this time - it will have to let inflation run, to allow incomes to catch up with debt. With no lift in rates for the foreseeable future, the dollar will remain under pressure.” He added.

Over the last month, commodity prices such as Iron ore, copper have tumbled which has taken its toll on the Australian economy and Aussie dollar, and analysts from Capital Economics  predict that the carnage is not over and further falls are expected as demand from China wanes.

This is also expected to drag the Australian dollar down further

"Signs of somewhat softer economic activity in China also raised concerns in the more industrial metals markets. Indeed, we suspect that prices have further to fall, as China's economy slows in the fourth quarter in response to earlier policy tightening." They said

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