The Australian Dollar could drop to US70 cents by the end of 2016 if Australia’s terms of trade deteriorate further as commodity prices weaken off the back of poor economic news from China and the wider global economy.
Jeremy Cook, World First’s London-based Chief Economist, has said that the August rate cut had done little to tarnish the Australian Dollar’s strength as Australia’s 10 year debt was still paying 2.12%, compared with 1.19% in Canada, 1.69% in the US and 0.85 in the UK.
“Coupled with the low political risks in Australia compared with other countries, there continues to be buying support for the Australian dollar, creating the need for companies to hedge their exposure”, he said.
“In the volatile economic climate, Australian importers should protect their profit margins at the highest possible levels through bespoke hedging contracts, which can be adjusted on a spot basis as there are dips and spikes in the Australian dollar against the major currencies on a regular basis.” he concluded.
Jeremy has lamented on this further in his Whitepaper, “Where now for the AUD?”. Download the paper now for more insights and information on how exporters and importers can take control of their currency strategy.
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