Australian Dollar Set to Stay Strong in 2013,

Despite Slowdown

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Peter Lavelle, 06.12.2012

Latest Exchange Rate Changes 29th November to 6th December 2012.

  • GBPAUD: 1.5312 to 1.5374 (+0.405%)
  • USDAUD: 0.9586 to 0.9562 (-0.25%)
  • EURAUD: 1.2441 to 1.2478 (+0.297%)

The Australian dollar has had a muted week, gaining marginally against the US dollar, yet losing close to half a cent against the pound and euro each. This reflects the ambiguous economic data to come out of Australia this week.

  • For one, the Reserve Bank cut interest rates to 3.0%, equalling the emergency level last seen in 2009.

  • In addition, Australia expanded just 0.5% in the third quarter, beneath 0.6% forecasts.

This all points to a slowdown in Australia's economy, which we'd normally expect to send the AU dollar downward.

Yet, in spite of that, there's little doubt that Australia is still outperforming its Western peers, where interest rates and growth are both close to 0.0%.

Hence, the Australian dollar should hold up, this year and next, even as Australia's economy moves down a gear.

How This Affects Your Australian Dollar Transfers

If you're currently in Australia and wish to transfer money out of the country, this forecast for a strong Australian dollar in 2013 is to your advantage. This is because it points to what Reserve Bank deputy governor Philip Lowe this week called the "new normal," wherein the Australian dollar stays high, almost regardless of disappointments in Australia's economy.

This is because, as I mention, Australia's economy will continue to outperform those of the West in 2013, such as the UK and Europe, even if it does slow down a little.

Hence, for example, that could mean the Australian dollar stays above parity against the US dollar, and remains elevated against the pound and euro. Therefore, that will benefit you when you exchange Australian dollars, because you can expect a higher pound or US dollar exchange rate in return.

What's Going to Affect the Australian Dollar Next?

With the Reserve Bank's December interest rate decision out of the way, and growth figures for Q3 released, it's a matter of looking forward to 2013 now.

As I mention, next year we can expect Australia's economy to hold up against its Western peers, particularly as growth in China improves, and the RBA's interest rate cuts filter through into Australia's retail and housing sectors. That will see the Australian dollar stay strong.

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