The Australian dollar sunk to a fresh four year low overnight after strong GDP data from the US yesterday added more pressure on the US Federal reserve to lift Interest rates early next year.
At 7.30pm (AEDT) the Australian dollar was fetching US81.11 cents after reaching a new 4.5 year low of US80.87 cents yesterday.
US gross domestic product increased 5% between July and September, the Commerce Department said, coming in well ahead of analysts’ expectations of 4.3%.
“The picture out of the US just keeps getting better and better” noted analysts at Fibogroup forex brokers.
“With numbers like these the fed will have to act soon on rates which can only add to the woes of the Australian dollar”
A growing number of analysts are also predicting a rate cut in Australia next year as unemployment grows and Inflation slides which will reduce the Interest rate gap between the US and Australia and lessen the attractiveness of the carry trade.
Interest rates in Australia currently stand at 2.5% while in the US they stand at 0.25%.
Addressing concerns about a slowdown in China and the effects on the Australian dollar Lee Hardman, an economist at Bank of Tokyo-Mitsubishi UFJ in London noted,
"It's been a weak year for the Australian dollar, reflecting the slowing growth outlook for China, which has resulted in a further deterioration of Australia's terms of trade," Lee Hardman, an economist at Bank of Tokyo-Mitsubishi UFJ in London.
"We still think there's scope for further downside going forward."
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