This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Reserve Bank Cuts Rate; Australian Dollar Set for Further Weakness

Before its Sept. 14 elections, the Australian government will release its final budget before elections proposals. The budget is expected to show due a deficit of A$14.5 billion for the fiscal year. To account for this shortfall, the government cites the elevated strength of the Australian dollar, as it constricts prices and corporate profits, thus limiting overall tax revenue.

The Australia's economy is driven largely by its resource investment boom, with commodities demand from developing countries such as China playing significant roles as primary export destinations. Increases in currency values make exports more expensive for foreign customers, so it is clearly in Australia's best interest to enact policy measures that help return the aussie to its historical averages.

Downward Valuation Prospects

All of these factors combined suggest continued weakness for the Australian dollar in the near-term view. Interest rates in Australia are still well above what is seen in the other G7 economies, so there is still scope for the RBA to make monetary policy more accommodative in order to limit the negative effects an elevated currency is having on macro growth data.

While positive for the stock markets in the region, these factors will put downside pressure on the Australian currency, likely sending it to new lows before the end of 2013.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Cox is a university teacher in international trade and finance. His articles appear on a variety of Web sites, including MarketBulls.net, Seeking Alpha, FX Street and others. Investing strategies are based on technical and fundamental analysis of all the major asset classes (stock indices, currencies and commodities). Trade ideas are generally based on time horizons of one to six months.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $122.37 -0.50%
FB $95.21 -1.84%
GOOG $632.59 0.10%
TSLA $266.79 1.13%
YHOO $37.42 -0.66%

Markets

Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.63 +0.06 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs