Please click here to view Shane Oliver's thoughts on the recent fall in the Australian dollar.
Key points raised are
- The Australian dollar has been hit since September by the return of Trump, a hawkish pivot by the US Federal Bank versus the RBA and concerns about the outlook for iron ore prices.
- We doubt the fall is significant enough to boost inflation much and shouldn’t stop the RBA easing in February if underlying (or trimmed mean) inflation falls as expected.
- In any case, it’s now had a bit of a bounce from oversold levels as Trump refrained from day one tariffs opting for government agencies to investigate unfair trade and tariffs and reportedly more of a negotiating approach.
- The Australia dollar could be stuck between $US0.60 and $US0.70, but with the risk skewed to the downside if Trump acts more aggressively on tariffs in the months ahead. Note, Trump still said in his inaugural speech that tariffs are coming.