Currencies | Apr 28 2011
By Rudi Filapek-Vandyck
1.15. That's the number now put forward by economists at St George Bank. If their prediction proves correct, the Aussie dollar still has a lot more traveling to do before finally hitting the wall that proves too stiff to break down.
Today's update on the Australian dollar also includes an interesting chart (see below) from which the economists draw the conclusion the US dollar has been in a long drawn out structural decline since the mid-eighties, while the Aussie has been in a long term uptrend since 2001.
Both trends are expected to continue. Says St George: "The combination of higher interest rates elsewhere in the world, slow US economic growth and a large US budget deficit is causing investors to shun the greenback. The recent declines in the USD are also helping the US export and manufacturing sector and therefore may be welcomed by the US administration. The old days of the "strong USD policy" appear to be over."
History shows a close relationship between Australia's terms of trade and the Australian currency, report the economists. This further supports their view the AUD is to remain well supported.
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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