The Aussie dollar takes a tumble

The Australian dollar has fallen against its American counterpart – don't expect a rebound.

The Australian dollar, or Aussie, lost 3.5% against its US counterpart last week its worst weekly showing in over a year. Don't count on a rapid rebound.

In recent years, the economy has been propped up by Chinese demand for metals. But with China weakening, mining investment is dwindling, and it's hard to see what will replace it.

In recent years, the strong Aussie has made it costlier for Australian manufacturers to sell their goods abroad, while it has also become more expensive for foreign manufacturers to operate there.

Meanwhile, the consumer boom of the 2000s left households with high debts so most are now looking to pay down their borrowings despite low interest rates. Unemployment close to a 12-year high also militates against stronger consumption. It's still not clear "how the economy will cope with the end of its mining boom", says Capital Economics.

The upshot is that if there is any change in interest rates soon, it will be a cut. Bank of America Merrill Lynch expects the Aussie to be the weakest developed-market currency next year. Compared to the US dollar, which is benefiting from expected higher interest rates, the outlook is especially bearish.

Recommended

Sterling accelerates its recovery after chancellor’s U-turn on taxes
Currencies

Sterling accelerates its recovery after chancellor’s U-turn on taxes

The pound has recovered after Kwasi Kwarteng U-turned on abolishing the top rate of income tax. Saloni Sardana explains what's going on..
4 Oct 2022
The MoneyWeek Podcast with John Mills: why a weak pound is good for the UK
UK Economy

The MoneyWeek Podcast with John Mills: why a weak pound is good for the UK

In a special bonus mini-podcast, Merryn talks to John Mills, founder of consumer goods distributor JML, chair of Vote Leave and one of the Labour Part…
3 Oct 2022
Bank of England spends £65bn to “restore orderly market conditions”
Budget

Bank of England spends £65bn to “restore orderly market conditions”

The Bank of England has said it will spend £65bn buying bonds to stabilise the financial markets after the government’s mini-Budget. Saloni Sardana ex…
29 Sep 2022
The end of cheap money hits the markets
Stockmarkets

The end of cheap money hits the markets

Markets have swooned as central banks raise interest rates, leaving the era of cheap money behind.
28 Sep 2022

Most Popular

Should you take a 25% tax-free pension lump sum in instalments?
Pensions

Should you take a 25% tax-free pension lump sum in instalments?

Taking out a 25% tax-free lump sum sounds appealing but it might not be the best way to manage your pension
30 Sep 2022
October’s Premium Bonds: how to check if you are a winner
Savings

October’s Premium Bonds: how to check if you are a winner

NS&I has added almost 110,000 more prizes to October’s Premium Bond draw – are you a winner?
4 Oct 2022
Section 75 refunds: protection for your credit card purchases
Credit cards

Section 75 refunds: protection for your credit card purchases

Under Section 75 of the Consumer Credit Act 1974, your credit card can give you extra protection when the goods or services you buy fall short of your…
23 Sep 2022