AUSTRALIA 
Australian dollar hits two-year low
Monday, 6 October, 2008
The RBA board is expected to cut interest rates tomorrow. (AAP)
Overseas holidays are tipped to get dearer by Christmas with the Australian dollar trading below US76 cents for the first time in two years.
The domestic currency shed one US cent this morning as financial markets contemplated a bigger than usual interest rate cut tomorrow from the Reserve Bank of Australia (RBA).
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A majority of economists expect the RBA to cut interest rates by 50 basis points for the first time in seven years.
The Australian dollar has shed 23 per cent since reaching a 25-year high of 98.49 US cents in mid-July, and has lost 8.4 per cent of its value in the past week alone.
The Australian dollar sunk to $US0.7585 at 1125 (AEDT), its lowest level since October 2006 and its weakest point since the onset of the global credit crunch.
Against the Japanese yen, the Australian dollar dropped below the key 80 yen level this morning for the first time since January 2005.
CommSec economist Savanth Sebastian said the Australian dollar was likely to struggle in the near term, making holidays to the United States in particular more expensive by year end.
"It's great news for the tourism industry in Australia.
"Over the last year, fewer people looked at Australia for a holiday destination from overseas."
Mr Sebastian said the Australian dollar was likely to recover to US78 cents by December, but then fall to US71 cents by September 2009.
With the US economy expected to recover, the Australian dollar was tipped to weaken against the US dollar, but firm against the euro.
On the bright side, Mr Sebastian said a Canadian holiday would become cheaper in the near term as the Canadian dollar weakened against the US currency.
Bank of New Zealand currency strategist Danica Hampton said today financial markets were responding to the prospect of a 50 basis point rate cut.
"The risk is to the downside," she said.
Futures markets have fully priced in a cut to the official cash rate of seven per cent, with a 50 basis point move rated as a 96 per cent chance.
RBC Capital Markets senior economist Su-Lin Ong said official interest rates would fall to 5.25 per cent by late 2009 as the RBA worried about a global economic slowdown.
"At the moment, the economy is clearly moderating and it is doing so against a very tenuous global backdrop.
"That argues for rates to be lower. There is scope for rates to move over the next 12 to 18 months."
All 19 economists surveyed by AAP last week were forecasting a rate cut, with 11 of them factoring in a 50 basis point move.
The RBA board is due to meet tomorrow morning, with the outcome to be released at 1430 (AEDT).
Source: AAP
The domestic currency shed one US cent this morning as financial markets contemplated a bigger than usual interest rate cut tomorrow from the Reserve Bank of Australia (RBA).
VIDEO: German government guarantees savings
RELATED: China 'can withstand market crisis'
IN-DEPTH: Finance
A majority of economists expect the RBA to cut interest rates by 50 basis points for the first time in seven years.
The Australian dollar has shed 23 per cent since reaching a 25-year high of 98.49 US cents in mid-July, and has lost 8.4 per cent of its value in the past week alone.
The Australian dollar sunk to $US0.7585 at 1125 (AEDT), its lowest level since October 2006 and its weakest point since the onset of the global credit crunch.
Against the Japanese yen, the Australian dollar dropped below the key 80 yen level this morning for the first time since January 2005.
CommSec economist Savanth Sebastian said the Australian dollar was likely to struggle in the near term, making holidays to the United States in particular more expensive by year end.
"It's great news for the tourism industry in Australia.
"Over the last year, fewer people looked at Australia for a holiday destination from overseas."
Mr Sebastian said the Australian dollar was likely to recover to US78 cents by December, but then fall to US71 cents by September 2009.
With the US economy expected to recover, the Australian dollar was tipped to weaken against the US dollar, but firm against the euro.
On the bright side, Mr Sebastian said a Canadian holiday would become cheaper in the near term as the Canadian dollar weakened against the US currency.
Bank of New Zealand currency strategist Danica Hampton said today financial markets were responding to the prospect of a 50 basis point rate cut.
"The risk is to the downside," she said.
Futures markets have fully priced in a cut to the official cash rate of seven per cent, with a 50 basis point move rated as a 96 per cent chance.
RBC Capital Markets senior economist Su-Lin Ong said official interest rates would fall to 5.25 per cent by late 2009 as the RBA worried about a global economic slowdown.
"At the moment, the economy is clearly moderating and it is doing so against a very tenuous global backdrop.
"That argues for rates to be lower. There is scope for rates to move over the next 12 to 18 months."
All 19 economists surveyed by AAP last week were forecasting a rate cut, with 11 of them factoring in a 50 basis point move.
The RBA board is due to meet tomorrow morning, with the outcome to be released at 1430 (AEDT).
Source: AAP
