Are we really going to ride through this global currency war completely defenseless? With the Fed having now spooked itself with one rate rise, and ratcheted back expectations to just two more this year, as well as acknowledging that it was market ructions that triggered the reassessment, the Australian dollar is once again on the march:
I don’t see it getting very far before reversing given the outlook for Australia’s key commodity prices remains terrible. But it doesn’t need to get far to do serious harm to the project of “rebalancing” the Australian economy. We’re already there and 80 cents will do material harm, reversing recent gains in non-mining export income and very likely volumes as well. The one truly bright spot in the economic “rebalancing” is the lift in non-mining exports which have enjoyed two big jumps when the dollar fell to 90 cents then 80 cents and was in the midst of a third updraft triggered by the fall to 70 cents:
This touches upon the ultimate irony of the “do nothing” RBA. If you let other central banks control your destiny then you’ll be forced into doing something via economic weakness anyway so your choices really boil down to just two:
