The Australian dollar has stabilised after hitting fresh lows overnight, amid growing expectations that the central bank will need to cut rates again.
At 0700 AEDT on Friday, the local currency was trading at 83.82 US cents, up from 83.79 cents on Thursday.
Disappointing economic growth figures on Wednesday have left Australia’s leading economists rethinking their interest rate forecasts, with several now expecting the cash rate to fall to new record lows in 2015.
Both Westpac and AMP Capital have scrapped forecasts of rate hikes next year and now predict two further cuts from the Reserve Bank, taking the cash rate to a new record low of two per cent.
The Australian dollar fell to 83.56 US cents overnight, its lowest level since July 2010.
Better than expected retail and international trade figures on Thursday gave the Australian dollar a slight boost but the enthusiasm was short lived as rate cut talk weighed on the currency, BK Asset Management MD, Boris Schlossberg, said.
“The sentiment towards the Australian dollar/US dollar has changed radically this week after a shockingly weak GDP reading,” Schlossberg said.
“The market is now much more receptive to the prospect of a rate cut from the RBA should growth slow down further.
“With rate expectations now tilted towards easing the pair remains under heavy selling pressure.”
AAP
