The Aussie Battler (Dollar)
Sep 23rd 2003, 4:23 am
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The Aussie Battler (Dollar)
$A heading for 5-year high as $US slumps
By Gabrielle Costa
September 23, 2003
Australia's dollar was yesterday propelled towards levels not reached for 5 years as global markets adjusted to continuing weakness in the US dollar.
The sharp rise in the local currency, which started to move higher earlier this month, follows the push by the Group of Seven countries for more flexibility in currency markets and was accompanied by rises in other Asian currencies, led by the yen, and in gold bullion prices.
On the other side of the ledger, Australian shares suffered their biggest fall in three months. The sharemarket was driven lower by shares with the highest US dollar exposure, while US equity market futures ahead of New York's opening last night were also down on expectations of further selling by foreign investors.
The G7 meeting opted to push for a weaker US dollar, which in turn promotes strength in other currencies and helps to minimise the US trade deficit.
As a result, the Australian dollar had been caught in the "slipstream" of the two most influential currency exchange markets, the US dollar against the euro and the yen, said HSBC chief economist John Edwards.
The dollar finished trading at US67.74c, short of the US68.45c high reached in July but economists said that from here on the currency was more likely to rise than fall and were predicting it to burst through the US70c mark by the end of the year, possibly reaching the US73c mark by mid-2004, a level not seen since the 1997 Asian debt crisis.
The yen touched its best levels since December 2000, reaching ¥112.38 against the $US in early London trading last night, but that gain knocked the stuffing out of the Japanese sharemarket, where the Nikkei lost 463.32 points, or 4.24 per cent, to 10,475.10, its worst fall since the aftermath of September 11, 2001.
The gold price rallied $US9.23 an ounce to $US385.88 in local trading yesterday.
Economists have warned that a sustained rise in the Australian dollar could hurt the economy, where only a handful of listed companies are helped by a stronger currency, which hits manufacturers and exporters particularly hard.
Dr Edwards said a lower US dollar would encourage US exports and bolster its growth momentum but that would not necessarily be good news for Australian companies.
"As a matter of fact, I think the strengthening of the Australian dollar on the whole does Australia no good at all at this point . . . the only group that really does well [when the dollar is high] is importers," Dr Edwards said.
His counterpart at Westpac, Bill Evans, agreed: "It's a good thing to have a low currency so we're going to have to learn to live with a higher currency." He forecast a continued rise for the Australian dollar into 2004.
BT Financial Group chief economist Chris Caton said his forecasts for the dollar were lower but still up, at US68c by year's end and US70c in 2004.
ANZ chief economist Saul Eslake said there was a sound economic basis for the rise in the dollar, unlike the mid-year rise, which had coincided with flat or falling commodity prices and a weak economic outlook.
By Gabrielle Costa
September 23, 2003
Australia's dollar was yesterday propelled towards levels not reached for 5 years as global markets adjusted to continuing weakness in the US dollar.
The sharp rise in the local currency, which started to move higher earlier this month, follows the push by the Group of Seven countries for more flexibility in currency markets and was accompanied by rises in other Asian currencies, led by the yen, and in gold bullion prices.
On the other side of the ledger, Australian shares suffered their biggest fall in three months. The sharemarket was driven lower by shares with the highest US dollar exposure, while US equity market futures ahead of New York's opening last night were also down on expectations of further selling by foreign investors.
The G7 meeting opted to push for a weaker US dollar, which in turn promotes strength in other currencies and helps to minimise the US trade deficit.
As a result, the Australian dollar had been caught in the "slipstream" of the two most influential currency exchange markets, the US dollar against the euro and the yen, said HSBC chief economist John Edwards.
The dollar finished trading at US67.74c, short of the US68.45c high reached in July but economists said that from here on the currency was more likely to rise than fall and were predicting it to burst through the US70c mark by the end of the year, possibly reaching the US73c mark by mid-2004, a level not seen since the 1997 Asian debt crisis.
The yen touched its best levels since December 2000, reaching ¥112.38 against the $US in early London trading last night, but that gain knocked the stuffing out of the Japanese sharemarket, where the Nikkei lost 463.32 points, or 4.24 per cent, to 10,475.10, its worst fall since the aftermath of September 11, 2001.
The gold price rallied $US9.23 an ounce to $US385.88 in local trading yesterday.
Economists have warned that a sustained rise in the Australian dollar could hurt the economy, where only a handful of listed companies are helped by a stronger currency, which hits manufacturers and exporters particularly hard.
Dr Edwards said a lower US dollar would encourage US exports and bolster its growth momentum but that would not necessarily be good news for Australian companies.
"As a matter of fact, I think the strengthening of the Australian dollar on the whole does Australia no good at all at this point . . . the only group that really does well [when the dollar is high] is importers," Dr Edwards said.
His counterpart at Westpac, Bill Evans, agreed: "It's a good thing to have a low currency so we're going to have to learn to live with a higher currency." He forecast a continued rise for the Australian dollar into 2004.
BT Financial Group chief economist Chris Caton said his forecasts for the dollar were lower but still up, at US68c by year's end and US70c in 2004.
ANZ chief economist Saul Eslake said there was a sound economic basis for the rise in the dollar, unlike the mid-year rise, which had coincided with flat or falling commodity prices and a weak economic outlook.
