$A dealt a triple blow this week

Written By Unknown on Kamis, 20 Juni 2013 | 15.03

FARMERS, local tourism operators and manufacturers are getting better news everyday as the Australian dollar falls even further.

The currency has dropped 3.5 per cent so far this week, driven by the strange combination of the US economy needing less help and the Australian economy possibly getting more help.

The days of the Australian dollar being above parity, or 100 US cents, are well and truly over.

The currency's fall began back in early May when financial market players started to realise that a string of positive US economic figures could mean an end to the US Federal Reserve's $US85 billion a month bond purchase program, designed to stimulate the American economy.

In the past two years the Fed's series of stimulus programs has seen the US dollar weaken against all the major currencies and has been one of the factors why the Aussie dollar has been above parity for most of the past two years.

That came to an end on Thursday morning, after the Fed's two-day policy meeting, when chairman Ben Bernanke said if good economic growth continues he would taper the program later this year and bring it to a close by mid 2014.

Adding to the local currency's woes on Thursday was the release of another batch of weak Chinese economic data, bad news for Australia's mineral and resource exporters.

A HSBC survey showed that manufacturing activity in China fell for a second consecutive month to a nine-month low.

The Australian dollar also dropped earlier in the week, after the release of the Reserve Bank of Australia's June 4 board meeting minutes.

While the central bank kept the cash rate unchanged at a record low of 2.75 per cent in June, it flagged the possibility of one or two more cuts by the end of the year.

When the RBA cuts the cash rate it is generally a negative for the Australian dollar and the comments from the RBA minutes sent it almost one US cent lower.

Forex.com research analyst Chris Tedder while the Aussie dollar has been dealt a blow it could be good for the economy as it transitions from being an economy powered mainly by mining investment to one that is more evenly balanced.

"The question is, will a lower Australian dollar be enough to spur growth in non-mining sectors of the economy, so that the transition away from mining investment is smoother than current economic data suggests it will be?"


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