- Richard Grace, Commonwealth Bank of Australia chief rates strategist
The Australian Dollar rebounded from the lowest level in four years against the Greenback as private capital expenditure data surprised markets to the upside. Softer US fundamentals a day earlier also supported the Aussie Dollar. The local unit gained 0.67% and traded at $0.8597 versus the US Dollar. Total new capital expenditure for September rose 0.2% on a seasonally adjusted basis, according to the Australian Bureau of Statistics. Analysts, however expected a 1.7% decline of capex.
A statement from Reserve Bank of Australia Deputy Governor Philip Lowe on Tuesday sent the Aussie Dollar spiralling downwards. Lowe highlighted that low interest were effective in Australia and that further rate cuts would also be beneficial for the economy. The cash rate, which has been on hold at 2.5% since August 2013, is seen to remain there at least until the mid-2015, according to consensus forecasts. Moreover, Lowe reiterated that the local currency remains too high and it will depreciate as the terms of trade decline. Adding to the downward pressure was a further decline in the iron ore price, as it extended its lowest level in five years. The last time the Australian Dollar fell below 85 US cents was during the Euro zone debt crisis in 2010.Over the past few weeks analysts have been consistently downgrading the Aussie's prospects. A few have even forecasted that the currency could depreciate as far as 75 US cents in 2015.
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