Bill Evans says the Australian dollar has reached its trough. Westpac’s chief economist expects the Aussie dollar to “go back up again” against the US dollar, as “bad news has already been priced into” the currency. 

“The idea the dollar goes to 80 [US cents] is unlikely,” Evans told Markets Spectator.

“We’ve had a turning point.”

At 0818 AEST the Australian dollar was at 92.32 US cents, down from 92.37 US cents yesterday, according to Bloomberg data. The currency had fallen 14 per cent between April 11, when it was at $US1.0545, and July 12, when it was at 90.49 US cents, over fears of a potential slump in commodity demand and prices due to a slowing Chinese economy.

“The commodity story still looks tentative,” Evans says.

“I think the dollar is at fair value.”

Evans does not believe the Australian dollar will reach parity against the US dollar in coming months and expects an August rate cut by the Reserve Bank of Australia. One of the concerns the RBA has over the economy is the value of the Aussie dollar against the US currency. Evans says the central bank would like to see the Australian dollar lower against the US in order to boost competitiveness in non-mining sectors.

If the Australian dollar was trading at four to five US cents below its current level, Evans says he would not expect the Reserve Bank to cut its benchmark cash rate from the current record low of 2.75 per cent.

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Its a real "catch 22".
If the US keep printing ( at current rates)...the US dollar looses strength and the AUD ( plus all other currencies) appreciate against the Greenback = ( exactly...what does it equal...our camp would say it should have no influence on our cash rate...but sure as eggs...it will put pressure on for more rate cuts).
If we do cut rates....and if our AUD has reached some tipping point against the USD....then further cuts will decrease our AUD/USD exchange rate = inflationary side effects.
So...conclusion....DO NOTHING!!

Bill evans writes another article on banks cutting interest rates.

Thats a brave , there's the possibility of the terms of trade tapering downwards dragging the Australian dollar further towards 85c. Trade and investment flows will eventually dictate the price,rather than speculators.There's also the possibility of the US economy decoupling from the low growth sphere,which would add boosters to the USD. However, Bill Evans has an ear to the ground so those of us needing to buy AUD should pay heed and definitely start accumulating.