The Australian dollar has fallen to its lowest level since early 2016, and market analysts do not rule out that if U.S. President Donald Trump continues to tax every commodity exported from China, the Australian dollar will fall below 70 cents.
The Australian dollar was slightly above 71 cents for most of Monday, but fell to just over 70 cents in late trading, the Australian Financial Review reported.
In addition to tariffs, the Australian dollar has been under pressure from weak emerging markets in recent weeks and hit a 22-month low on Friday as the dollar strengthened on the back of strong U.S. labour market data in August.
As the Australian dollar faces multiple problems, Ray Attrill, head of foreign exchange strategy at National Bank of Australia (NAB), said it was difficult to say when the downward pressure would stop.
"it`s hard to see what really stops the fall and we really need some good news, but there`s no sign that Trump will stop," he said. There was still some naive hope that he might not move on. Overall, trade tensions are thought to be worse. "
Attrill said the Australian dollar could reach 70 cents by the end of this week if Trump applied the proposed tariff and Beijing responded in the same way.
(photo source: Australian Financial Review)
"I certainly think there is a reasonable chance that the Australian dollar will fall to this low," he said. I`m trying to find out why I can`t skate that far. If things do get worse, the Australian dollar could slip to 65 cents. But this is not our main forecast at this stage. The history of the past two years has been that the Australian dollar has not had much time under 70 cents. "
Sean Callow, senior currency strategist at Western Pacific Bank (Westpac), said Trump`s tariff decision was crucial to the Australian dollar`s performance this week, and that a 70-cent dip was not impossible. Now investors are just waiting nervously. What is Trump`s decision on tariffs?
It is understood that the White House is finalizing a $200 billion (A $281 billion) commodity tariff, which may be announced in the next few days, but Trump has also raised the possibility of an increase in tariffs worth $267 billion in the short term.
The Australian dollar could fall below 70 cents if Trump imposes an additional $267 billion tariff, Attrill said.
Earlier, the Sydney Morning Frontier reported that Trump was preparing to launch his biggest blow to date in the trade war with China, and that Australia would prepare for a $36 billion economic blow. Further upgrades could result in the loss of 60,000 jobs in Australia.
