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Australian dollar to head back below 70 cents, say economists

The Australian dollar’s rally will be short-lived, according to some economists, with downward pressure to come from the US Federal Reserve and elsewhere.

The dollar has recovered from a low of $US 0.6896 on September 7, falling by a fifth in 12 months. However, it was trading as high as $US 0.7346 on Saturday morning, Business Spectator reports.

This followed a decision by the US Federal Reserve to leave the country’s interest rates on hold, weakening the US dollar.

Westpac’s chief economist Bill Evans has said the Australian dollar will be heading south again soon to be worth $US 0.68 at the end of the year, and $US 0.66 in next year’s first quarter.

He cited the Federal Reserve, commodities prices and Australia’s “chronic external deficit” as reasons for his bearishness, according to Business Insider.

Meanwhile, Reuters reports that TMS Brokers’ Konrad Bialas tips that the dollar will be worth $US 0.69 at the year’s end.

On the dollar falling back to its lowest point for the year, “The probability is still significant", Bialas wrote. His team, TMS, “the best forecaster” of the Australian dollar – according to Reuters – predicts China will revise its five-year growth forecast downwards later this year.

"I can agree that China fears from August-September were exaggerated," but "the outlook isn't that rosy to buy any risky assets without hesitation" he said.

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