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The Australian Dollar - Worthless!?

Things are looking very bad for the Australian dollar.

At 7.00am the dollar was trading at $US0.5090/95, down from $US0.5135/40 late yesterday.

Australian traders said the dollar was flirting with its record low of US$0.5070 reached in November last year. "Dealers are surprised in fact that it hasn't already made historical lows," said Macquarie Bank divisional director Geoff Bowmer.

-- AAP, Thursday 8 March 2001, 08:10 AM

In retaliation Prime Minister John Howard announced that Australia was not heading into recession, but that the next Australian budget would actually be in surplus.

The fall of the Australian dollar was due to a 0.6 per cent fall in December-quarter gross domestic product, which was worse than expected. Experts believe that this means that the Australian dollar may be headed for 48 US cents in the next few months, and could even "slide to new historic lows in the next two days," according to the National Australia Bank!!

Macquarie Bank says "The market just doesn't have confidence in Australia's economic outlook, the Australian dollar is poor against the Euro, New Zealand dollar and Canadian dollar. Therefore its fall is an Australian dollar story, not a US dollar story and the Australian dollar's weakness is premised on the fear that growth in the Australian economy will be weak in 2001."

Even travel companies like http://www.travel.com.au/ have been affected by the weakness of the Australian dollar - they have had a loss of AUD$4.3 million in first-half net operating profits.

How on earth can they let this continue? Why does the Reserve Bank do something to fix this nasty situation? The AUD has been going downwards for the last two years, and it's just going to get worse. It's not like they haven't known that this was happening. They have known, and should have taken steps to fix this.

The AUD sure looks like they need a lot of help, and soon.

Especially since I'm going to the US in June. :p

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© Caroline Seawright 2001

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