Confusion over Aussie dollar’s direction

Pundits have released wildly different predictions on the direction of the Australian dollar over the next twelve months, with mixed expectations for the future of the manufacturing industry.

In an opinion piece earlier this week Business Spectator commentator Stephen Koukoulas tipped the possibility of the dollar rising to $US1.25 over the next year or two.

Marking Australia's triple-A credit rating, an improving global economic outlook, and a rebound in commodity prices, Koukoulas claimed the dollar could be well on its way to “new highs” in the near future.

But Perth-based commentator and Forbes writer Tim Treadgold has posted a different view, tipping the dollar to slide over the next 12 months.

With a more pessimistic outlook on the economy, Treadgold claims the only question on the dollar's direction is whether there will be a “slow slide or a sudden fall”.

With the benefits of the mining boom fading and the problems of Europe and the United States still looming, Treadgold claims there may be a minor respite on the horizon for trade-exposed industries.

“It is highly unlikely that the AUD will fall back to its lows of a decade earlier, but there is no doubt that pressures are building in the economy, and those pressures will eventually be felt in the value of the currency,” he said.

There are innumerable more predictions on the dollar that fall roughly between these two positions, and only time will tell as to which school of thought prevails.

But as the commodity price upset of late 2012 proved, prediction is often less scientific than it ought to be, and even at the best of times it's a tricky game to play.

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