The Australian dollar tumbled overnight hitting a fresh 5.5 year low weighed down by falling commodity prices and expectations that the Reserve Bank Of Australia is bound to cut interest rates next week or in March the latest.
At 4.46pm (AEDT) the local currency was trading US77.91c after reaching a low of US77.18c in yesterday's trade.
Three of the four major banks in Australia now agree that the RBA will cut rates soon although they predict that the first move will come in March.
Looking forward, Commonwealth Bank's chief currency strategist Richard Grace noted that the Futures market is a sign of the sediment surrounding the Australian dollar at the moment,
"If you look at the 30-day futures, which is a good measure of where interest rate expectations are, from a current cash rate of 2.5 per cent they've got interest rates priced down to 1.9 per cent by March 2016," he said.
On the timing of the first interest rate cut for the year by the RBA he also noted,
"The speculation around next week's cut still remains around that 50 per cent probability, with 2.35 per cent priced in, but you've got almost a full rate cut priced in for March, so if they don't move next month the speculation is they'll move in March."
Also pressuring the Aussie dollar yesterday was the slump in iron ore prices hitting a new 5 year low in yesterday's trade.
The price of Australia's biggest export fell to $US62.70 a tonne, down 0.2% from the previous day, reaching levels not seen since 2009.
According to Piet-Hein Ingen Housz, global head of metals at ABN Amro Bank NV, investors shouldn't hold their breath for a recovery in the iron ore price any time soon as big companies ramp up production at a time when the market is already flooded, to grab a bigger piece of the market,
“My crystal ball says iron ore will remain low. Demand in winter is usually lower than the rest of the year as steel mills cut output before the Lunar New Year, while the so-called big four miners are producing more than ever to gain market share and weed out smaller producers" he said.
At 4.46pm (AEDT) the local currency was trading US77.91c after reaching a low of US77.18c in yesterday's trade.
Three of the four major banks in Australia now agree that the RBA will cut rates soon although they predict that the first move will come in March.
Looking forward, Commonwealth Bank's chief currency strategist Richard Grace noted that the Futures market is a sign of the sediment surrounding the Australian dollar at the moment,
"If you look at the 30-day futures, which is a good measure of where interest rate expectations are, from a current cash rate of 2.5 per cent they've got interest rates priced down to 1.9 per cent by March 2016," he said.
On the timing of the first interest rate cut for the year by the RBA he also noted,
"The speculation around next week's cut still remains around that 50 per cent probability, with 2.35 per cent priced in, but you've got almost a full rate cut priced in for March, so if they don't move next month the speculation is they'll move in March."
Also pressuring the Aussie dollar yesterday was the slump in iron ore prices hitting a new 5 year low in yesterday's trade.
The price of Australia's biggest export fell to $US62.70 a tonne, down 0.2% from the previous day, reaching levels not seen since 2009.
According to Piet-Hein Ingen Housz, global head of metals at ABN Amro Bank NV, investors shouldn't hold their breath for a recovery in the iron ore price any time soon as big companies ramp up production at a time when the market is already flooded, to grab a bigger piece of the market,
“My crystal ball says iron ore will remain low. Demand in winter is usually lower than the rest of the year as steel mills cut output before the Lunar New Year, while the so-called big four miners are producing more than ever to gain market share and weed out smaller producers" he said.
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