Aussie Hits Two-Month Low

as Budget Surplus to Be Missed

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Peter Lavelle, 20.12.2012 - on the latest changes in the Australian dollar exchange rate, covering the 13th-20th December 2012.

This is intended as a brief guide to movements in the Aussie this week, to put you in the best position for when you exchange currencies.

Are you looking for an exchange rate quote? Please fill your details in the form below.


There's been a nice Christmas present for you this week if you intend to send money to Australia: the Aussie dollar has fallen to a two-month low against UK sterling and the euro, as Australia's economy comes up against a number of speed bumps.

Most importantly, Australia's Treasurer Wayne Swan has broken a long-held promise to return the country to surplus in 2013, citing a comedown in commodity prices and the high Aussie exchange rate. The Treasurer said this week: "What we've seen is a sledgehammer hit our revenues."

In addition, Reserve Bank of Australia governor Glenn Stevens poured cold water on Australia's prospects for 2013 this week, saying the central bank can't be expected to engineer a smooth transition from the mining boom. Mr. Stevens said in an interview: "We've got to recognise that monetary policy has limits to fine tuning."

Overall, those two things proved enough to bring the Aussie dollar to its lowest point against the pound and euro since late October.

What's Going to Happen in 2013?

So, the Australian dollar is currently at a low point. But, for those of you that need to transfer money to the land Down Under, the question is: will the Aussie continue to weaken next year?

Unfortunately, this is an uncertain prospect. This is because, though these bleak announcements drove the Aussie down this week, Australia still has far too much going for it to push the AU dollar down too far.

For example, Australia is set to expand 3.0% next year, according to the latest forecasts. This is some way off the 4.5%+ pace set during the peak of the mining boom, but is still leagues ahead of Europe, the UK or United States. That will keep the Aussie high.

Furthermore, Australia's Reserve Bank will keep interest rates at 3.0% in 2013: a rate low by Australian standards, but far higher than other industrialised nations. This makes Australian bonds and assets highly attractive to investors, also driving up the Aussie dollar.

Given that, we can expect the "super strong" Australian dollar we've seen emerge since the financial crisis to endure.


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