Aussie dollar falls to 13-month low

The Aussie dollar traded at a 13-month low on Thursday morning as investors are cautious about Australia’s economic future.

Aussie dollar craters to 13-month low. Picture: NewsWire / Nicholas Eagar

A perfect storm has hammered the Australian dollar, seeing it crater during trading overnight.

The Aussie dollar fell to a 13-month low overnight during Thursday’s trading, although it bounced late during trading.

Overnight, the AUD fell to 63.36 US cents, its lowest levels in almost 13 months, before it bounced to 63.9 US cents.

The Aussie dollar is falling as it trades lower on three fronts. Picture: NCA NewsWire / Nicholas Eagar

IG market analyst Tony Sycamore told NewsWire the Aussie dollar fell off the back of weakness both domestically and internationally.

“The Aussie dollar fell due to domestic factors including weak GDP figures which caused the RBA to change their stance and become dovish. Markets are now looking for a rate cut in February, when they were previously factoring in a rate cut as late as May,” Mr Sycamore said.

This has a negative impact on the Australian dollar as investors who hold the currency will receive less than they previously would if the RBA was to cut rates.

“The second part of it is the US dollar had a good night. It has been rallying since the lead up to the US election and it continued last night,” Mr Sycamore said.

“So on both sides of the equation the Aussie dollar is suffering.”

On the other side of the world, the US is looking to help support growth through interest rate relief and so far has held up relatively strong compared with the Australian markets.

Capital.com senior financial market analyst Kyle Rodda said the US CPI data came in almost exactly as expected, raising the chance of another rate cut in December.

“The critical core inflation measure rose 3.3 per cent in November while the headline lifted to 2.7 per cent as forecast,” he said.

“Although signalling stickiness and creating some uncertainty about the path for rates in 2025, it provides the Fed scope to cut rates by another 25 basis points and reduce the degree by which monetary policy is restrictive,” he said.

Mr Sycamore said the Aussie dollar is facing further pressure from China given it is Australia’s largest trading partner.

“There was hopes early in the week that stimulus would support the Chinese economy. That could still be the case, but after being burnt in September, the market really wants to see evidence from the Chinese authorities,” he said.

Aussie dollar craters to 13-month low. Picture: NewsWire / Nicholas Eagar

Adding to the uncertainty is today’s Australian jobs report, which has gained increased significance following the RBA’s dovish shift earlier in the week.

“The market expects the Australian economy to add 25,000 jobs and the unemployment rate to rise to 4.2 per cent from 4.1 per cent A weaker-than-expected employment report would strengthen the case for a first RBA interest rate cut in February,” Mr Sycamore said.

The decline in the Aussie dollar started with the RBA’s decision to hold rates on Tuesday for the ninth consecutive meeting, even though there were signs of weakness.

This decline is primarily influenced by the Reserve Bank of Australia’s (RBA) decision to maintain interest rates at 4.35 per cent for the ninth consecutive meeting.

RBA Governor Michelle Bullock emphasised that the central bank’s current stance on inflation is deliberate, even as the Australian economic backdrop weakens.