Australian dollar dips below US70c amid global currency shifts

The Australian dollar has taken a sharp dive over the past few weeks, falling well below the US70c mark. After a steady rise through 2023, starting at around US62c and ending December at US67c, the currency spent most of this year above US70c. It even peaked at around US72.5c in mid-May before beginning its current descent. By noon on the reporting day, the A$ was trading at US69.68c, down approximately US2.4c or 3.3% in the past three weeks, reaching a low of US69.28c on October 1.

A weaker Australian dollar benefits the country’s red meat export trade, as much of the international beef trade is conducted in US dollars. For example, an exporter receiving US$100,000 would convert it into about A$143,000 at US70c, or A$154,000 at US65c. The US Dollar Index, which measures the US currency’s value against six other major currencies, recently hit its highest level in 17 months. Analysts noted that the Australian dollar is softening against all major foreign exchange benchmarks, though the degree varies.

The A$ decline is partly due to a strengthening US dollar, following the release of softer-than-expected US inflation data. The US Personal Consumption Expenditures Price Index showed annual headline inflation remained unchanged at 3.4% in August, below the 3.7% expected by markets. However, stronger US employment and economic growth figures offset the initial selling pressure on the US dollar. US private-sector employment increased by 90,000 jobs in September, up from a revised 36,000 in August, and US economic growth was revised higher to 2.2% for the second quarter.

StoneX Trading noted that the A$ fell after the Reserve Bank’s interest rate hike to 4.6% last week, as the move was already priced in by the market. The RBA’s rate hike has put Australian inflation data in focus, adding to the currency’s recent volatility.