Aussie dollar hits lowest level since ’09

The Australian dollar is down nearly 6.0 per cent since the start of the year and hitting decade lows against its US counterpart, which is bad news for travellers but could be good for the economy.

At 1528 AEDT, the Aussie was buying just 66.00 US cents, the least since during the global financial crisis in March 2009, and down from 70.16 US cents at the start of the year.

The immediate reason for the drop was a lift in the unemployment rate announced on Thursday but the Aussie has been under pressure for months.

“It’s been coming down on the coronavirus scare, which is logical in a way because Australia is seen as one of the most exposed developed economies to the Chinese economy,” AMP chief economist Shane Oliver said.

The US, meanwhile, was seen as a safe haven and the greenback had been gaining, he said.

Economists said the Aussie could fall even lower, particularly if the coronavirus took a long time to contain and China’s economy was shut down for an extended period.

“Technically now the AUD looks very vulnerable and with the USD having momentum on its side, many will be looking at GFC levels as a guide for AUD support,” NAB senior FX strategist Rodrigo Catril said in a note.

The Aussie hit a low of 62.50 US cents in February 2009, its lowest level since 2003.

It has averaged 76.70 US cents since the Hawke government floated the dollar in December 1983.

Mr Oliver said the weak Aussie would make overseas holidays more expensive and likely increase the cost of imported goods such as cars, clothing, electronics and petrol.

But it would also make Australia’s export-oriented economy more competitive internationally as Australian goods and commodities became cheaper.

“It’s a form of monetary easing really,” Mr Oliver said. “The Reserve Bank would probably be happy if it goes lower.”

ANZ head of Australian economics David Plank said in a note that while the weakness in the Aussie might provide “some offsetting stimulus”, ANZ still predicted an RBA cash rate cut in the second quarter was more likely than not.

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