Australian dollar slides

The Australian dollar has fallen Wednesday, buying 71.79 US cents from 71.90 US cents on Tuesday.

Yesterday, the local currency has sailed into choppy seas as sellers swamped Asian equity markets, but its US counterpart faced uncertainty of its own over interest rates.

As a result, the Aussie was actually a shade firmer on the US dollar at 71.89 US cents, but lost ground on the safe-haven yen to 80.83.

The US currency has been undermined by speculation the Federal Reserve will use a policy meeting on Wednesday to signal that further hikes in rates will be conditional on economic fortunes.

There is also a chance President Donald Trump could force a partial shutdown of the US government on Friday if Congress does not approve funding for his proposed US-Mexico border wall.

“We believe the risk is the US dollar ends the week lower if the short-term funding bill is not approved and if the Fed changes its forward guidance from expecting “further gradual increases” to describing the Fed funds rate as “close to neutral”,” said CBA currency strategist Richard Grace.

At home, the Reserve Bank of Australia reiterated that the next move in rates was likely to be upward but there was no strong case for a move anytime soon given downside risks to consumption and the housing market.

“The sentiment in these minutes is somewhat less confident about the economy,” said Westpac chief economist Bill Evans.

“Taking into account the attention given to the credit, housing, consumer and external risks, these minutes should be interpreted more ‘dovishly’,” he argued.


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