Australian dollar trades below US parity.
The Australian dollar slipped below parity with the greenback Monday and analysts tipped it could fall further as speculation mounts that the US could wind back its quantitative easing policy. The "Aussie" hit a low Monday of 99.78 US cents before recovering slightly, after Saturday briefly dipping under parity in offshore trade for the first time in 12 months on fears that the mining-powered economy was slowing. Analysts said the currency's robust run may have peaked as Australia's historic boom in mining investment plateaus, coupled with speculation that the US Federal Reserve will ease its bond-buying programme. It follows a Wall Street Journal story over the weekend that the Fed had come up with a strategy to wind down its US$85 billion dollar per month bond-buying programme, although it has not been decided when to start. "The Aussie dollar has started the week on the back foot, struggling to retain parity against the greenback," said CMC Markets trader Niall King. "As speculation mounts that stimulus will be reduced, the increasing relative strength of the US dollar has, as a bi-product, eased some headaches for Australian exporters at least." The strong Aussie has hurt some local industries, with tourism, manufacturing and education exports particularly hard-hit, and the central bank last week slashed interest rates to a record low of 2.75 percent. In doing so it cited the need to stimulate Australia's non-mining economy. The bank expects Australia's economy to expand at below-average pace this year, with growth of 2.5 percent and inflation of 2.25 percent. The government will release updated economic forecasts on May 14. US retail sales data later Monday could prove another threat to the Australian dollar. "Tonight sees the release of US retail sales -- if a good print (outcome) is seen, the strength shown in the US dollar over the past five days will continue and the weakness in the Australian dollar will also accelerate," said IG Markets' strategist Evan Lucas.
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