How to combat dollar's decline
A DIVING Aussie dollar has rubbed some shine from online retail bargain hunting but some savvy shoppers have been finding novel ways to bolster their buying power.
A DIVING Aussie dollar has rubbed some shine from online retail bargain hunting but some savvy shoppers have been finding novel ways to bolster their buying power.
With our dollar dropping about US15c in the past few weeks, an analysis of transactions by financial services company Access Prepaid has discovered a spike in online shoppers using foreign exchange travel cards to lock in higher exchange rates.
Economists say last week's US dollar exchange rate, at US95c, is still high by historical standards, and the recent fall is good news for everyone except online shoppers and travellers heading overseas.
Many economists predict more volatility in the months ahead amid uncertainty about Europe's debt crisis and global economic worries, but expect the Aussie to be at current levels or higher about 12 months from now.
For online shoppers, the recent 15 per cent plunge in our currency has wiped out 15 per cent of their purchasing power.
The number of shoppers using travel cards to make online purchases - instead of their traditional use for overseas travel - has jumped 50 per cent in the past year, says Access Prepaid's director of global sales and strategic relationships, Graham Perry.
"The use of prepaid cards for online shopping is skyrocketing," Perry says.
"You lock in the exchange rate and you don't expose personal banking details to merchants on the other side of the world," he says.
"Something like 75 per cent of all cross-border online shopping in the world is done in a shop in the US or the UK."
Shoppers, travellers and investors need to put the Aussie dollar's latest fall into perspective. Ten years ago it was trading below US50c and five years ago it was US74c.
CommSec chief economist Craig James expects a turbulent time for the currency over the next few months, but says the recent weakness is "not a bad thing".
Exporters and manufacturers benefit from a weaker dollar, and it can even help the local share market.
"A whole raft of companies benefit when the Aussie's trading lower. It may provide some opportunities for foreign investors to say our shares are super cheap," James says.
CommSec forecasts the dollar to trade at $US1.07 or $US1.08 in the second half of next year.
HSBC Australia chief economist Paul Bloxham is less bullish, tipping the currency to stay near current levels for the next couple of years.
"Forecasting exchange rates is extraordinarily hard to do," he says, adding that people should remember that even after the latest fall, the Aussie dollar is still near its highest levels in three decades.
"If you had said a couple of years ago the Aussie would be US95c, you would be saying that's extraordinarily strong."
"We have had a period where it's been above parity, people have adjusted to that."
"We thought it was a bit overvalued when it was over parity. That's why we have it forecast staying at these levels for a while."
CMC Markets senior foreign exchange dealer Tim Waterer says more weakness in the next few weeks is possible if shares continue to slide.
"Much will depend on how soon the market starts to price out the likelihood of a Eurozone 'doomsday' event happening," Waterer says.
"I see our dollar holding above US90c short term, before regaining parity and above within six months, but it's dependent on a steady rebound in global equity markets."