The Aussie Dollar
It’s now almost 30 years since the float of the Australian dollar and rarely has it been stronger than in the past few years. Only now are investors, surprised at the rapidity of the recent drop, waking up to this fact. The economy is starting to feel it too, with Ford closing down local operations, local tourism struggling as Australians head overseas and now Holden giving an ultimatum to staff: accept pay cuts or risk losing your job. Many people explain away this strength with the phrase ‘‘commodities boom’’, but it’s more complex than that. There are five key influences on the Australian dollar and each in its own way offers a clue as to how low the dollar might fall. 1. Interest rates If you can borrow at 0.25 per cent in Europe, the US or Japan and can invest it in Australian bonds, assets or bank accounts paying 3-4 per cent, plus capital gains, why wouldn’t you? Nat...