Shocking time for an overseas holiday: Australian dollar plummets to a 10-year low – and it could go LOWER
- The Australian dollar fell to a 10-year low of 66.8 US cents after Kiwi rate cute
- Reserve Bank of New Zealand has cut interest rates to a record low one per cent
- The half a percentage point rate cut took financial markets by surprise today
The Australian dollar has plummeted below 67 US cents for the first time in 10 years after New Zealand unexpectedly cut interest rates.
The Reserve Bank of New Zealand has followed Australia’s example and cut the cash rate to a new record low of one per cent – but in a more dramatic fashion.
The news caused the Australian dollar to plunge on Wednesday afternoon to 66.88 US cents, the lowest level since March 2009 during the height of the global financial crisis.
A weaker Australian dollar, against the American greenback, makes overseas holidays and imported goods more expensive.
The Australian dollar has plummeted to a 10-year low after New Zealand cut interest rates
Foreign exchange markets have reacted with shock, after New Zealand’s central bank cut interest rates by half a percentage point.
It acted even though the Kiwi jobless rate of 3.9 per cent is the lowest in 11 years.
CommSec chief economist Craig James said it appeared the Reserve Bank of New Zealand was worried about the nation’s slow economic growth pace as the United States engaged in a trade war with China.
‘Growing global trade tensions and weak business and consumer confidence have weighed on economic growth,’ he said.
New Zealand’s economic is growing at 2.5 per cent, the weakest since 2013.
By comparison, Australia’s growth pace of 1.8 per cent is the slowest since 2009 during the GFC.
The Australian dollar was already struggling, and fell close to 67 US cents on Tuesday as the share market lost another $47billion. The benchmark S&P/ASX200 dived by another 2.4 per cent, or 162 points, marking the biggest one-day fall since last year and wiping out gains made since June
The Reserve Bank of Australia cut interest rates in June and July, by a quarter of a percentage point each time, taking the cash rate to a record low of one per cent.
The Australian dollar was already struggling on Wednesday, after falling close to 67 US cents on Tuesday as the share market lost another $47billion.
The benchmark S&P/ASX200 dived by another 2.4 per cent, or 162 points, marking the biggest one-day fall since last year and wiping out gains made since June.
On Monday and Tuesday, the Australian Securities Exchange lost $83billion – a week after reaching a record high.
The Australian dollar took another battering on Wednesday afternoon because most economists had only expected the Reserve Bank of New Zealand to cut rates by 25 basis points, or 0.25 percentage points.
A Reuters survey showed 18 out of 21 economists were forecasting a quarter of a percentage point cut instead of a half a percentage point easing.