The Australian dollar's gyrations this week suggest it could be bouncing around at unusually low levels for some time thanks to feverish coronavirus panic.
Yet while the pandemic, combined with slumping oil prices, triggered a financial stampede which sold down the value of our dollar against the US currency and had traders rushing for the safety of offshore bonds and gold, pundits were unsure about how long the current mood could persist.
Both the Australian and New Zealand dollars touched 11-year lows on Monday, with the Aussie falling to a particularly export-friendly US63 cents, then steadily recovering to around US66.8c.
It ended yesterday down a cent at US65.5c.
The Australian exchange rate has been under pressure for two months because Australia has such strong trading ties to China where the coronavirus emerged in mid-January.
The dollar started this year at US70, having fluctuated between US72c last April and US67c in September.
After the Reserve Bank of Australia pruned interest rates to a new record low of 0.5 per cent last week it dipped for a while but recovered to US67c before Monday's "flash crash".
Despite being in uncharted waters and surrounded by a sea of coronavirus uncertainties, the Australian Bureau of Agricultural and Resources, Economics and Sciences has tipped the dollar would average around US68c this financial year, and again in 2020-21.
It has also assumed a gradual appreciation over the medium term to US74c by 2024-25, partly based on expectations of a global growth recovery and rising demand for Australian coal and iron ore.
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"Uncertainty arising from the COVID-19 outbreak is likely to exert downward pressure on the Australian dollar as investors seek safe haven assets such as US and Japanese bonds," ABARES said.
However, the national commodity forecaster was also tipping a reduction in US interest rates this year which would add support to the Australian currency.
It assumed the trade weighted index would remain around 60 in 2019-20 and next financial year, rising slowly to 62 by 2024.
Last week ABARES said it expected the Australian economy to grow at two per cent in 2019-20, compared to growth of between 4.8pc and 5.1pc in South East Asia for 2020 and 2021 and about 2pc in the US.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
