A sharp fall in the Australian dollar may provide a short-term boost to economic growth, but also risks re-igniting inflationary fears in the longer term, dealers say.
The Aussie dollar has slumped almost 20 percent since reaching a 25-year high of US$0.9849 in mid-July, when many economists predicted it would reach parity with the greenback for the first time since it was floated in 1983.
But falling commodity prices and Australia’s first interest rate cut in almost seven years this month saw the currency slip below US$0.80 for the first time in 13 months last week.
While it recovered slightly to close at US$0.8063 on Friday, market watchers said the currency was likely to fall further amid expectations that the Reserve Bank of Australia (RBA) would again cut rates to offset an economic slowdown.
“With commodity prices still falling, further interest rate cuts likely from the RBA ... further falls in the Australian dollar are likely over the next six months or so, with next stop being around 75 US cents,” AMP Capital Investors chief economist Shane Oliver said.
The declining currency is tipped to significantly impact on Australia’s trade sector.
“While this may provide a short-term boost to the economy via the terms of trade, it also creates upside risks to the outlook for tradeables inflation,” said Warren Hogan, ANZ Bank’s head of Australian economics and interest rate research.
He said a weaker currency would affect the terms of trade — the ratio of export to import prices — by making exports cheaper to overseas customers and imports more expensive for Australian consumers.
“This should be a positive for net exports and for overall GDP growth,” Hogan said.
The longer-term problem stems from what Hogan terms “tradeables inflation,” when the cost of living in Australia rises because of the higher prices consumers have to pay for imported goods.
The threat from rising inflation was the major reason the Reserve Bank hiked Australian interest rates to among the highest in the developed world before this month’s policy reversal in the face of slowing growth.
Any indications that inflationary pressures were on the rise were likely to make the central bank more cautious about further interest rate cuts, Hogan said.
The bank has predicted headline inflation will hit 5 percent next year, but says it is then likely to return to the official target rate of 2 percent to 3 percent if wage and demand growth remain moderate in the near term.
Nvidia Corp yesterday unveiled its new high-speed interconnect technology, NVLink Fusion, with Taiwanese application-specific IC (ASIC) designers Alchip Technologies Ltd (世芯) and MediaTek Inc (聯發科) among the first to adopt the technology to help build semi-custom artificial intelligence (AI) infrastructure for hyperscalers. Nvidia has opened its technology to outside users, as hyperscalers and cloud service providers are building their own cost-effective AI chips, or accelerators, used in AI servers by leveraging ASIC firms’ designing capabilities to reduce their dependence on Nvidia. Previously, NVLink technology was only available for Nvidia’s own AI platform. “NVLink Fusion opens Nvidia’s AI platform and rich ecosystem for
CAUSE AND EFFECT: China’s policies prompted the US to increase its presence in the Indo-Pacific, and Beijing should consider if this outcome is in its best interests, Lai said China has been escalating its military and political pressure on Taiwan for many years, but should reflect on this strategy and think about what is really in its best interest, President William Lai (賴清德) said. Lai made the remark in a YouTube interview with Mindi World News that was broadcast on Saturday, ahead of the first anniversary of his presidential inauguration tomorrow. The US has clearly stated that China is its biggest challenge and threat, with US President Donald Trump and US Secretary of Defense Pete Hegseth repeatedly saying that the US should increase its forces in the Indo-Pacific region
ALL TOGETHER: Only by including Taiwan can the WHA fully exemplify its commitment to ‘One World for Health,’ the representative offices of eight nations in Taiwan said The representative offices in Taiwan of eight nations yesterday issued a joint statement reiterating their support for Taiwan’s meaningful engagement with the WHO and for Taipei’s participation as an observer at the World Health Assembly (WHA). The joint statement came as Taiwan has not received an invitation to this year’s WHA, which started yesterday and runs until Tuesday next week. This year’s meeting of the decisionmaking body of the WHO in Geneva, Switzerland, would be the ninth consecutive year Taiwan has been excluded. The eight offices, which reaffirmed their support for Taiwan, are the British Office Taipei, the Australian Office Taipei, the
WARNING: From Jan. 1 last year to the end of last month, 89 Taiwanese have gone missing or been detained in China, the MAC said, urging people to carefully consider travel to China Lax enforcement had made virtually moot regulations banning civil servants from making unauthorized visits to China, the Control Yuan said yesterday. Several agencies allowed personnel to travel to China after they submitted explanations for the trip written using artificial intelligence or provided no reason at all, the Control Yuan said in a statement, following an investigation headed by Control Yuan member Lin Wen-cheng (林文程). The probe identified 318 civil servants who traveled to China without permission in the past 10 years, but the true number could be close to 1,000, the Control Yuan said. The public employees investigated were not engaged in national
RSS