The Australian dollar dropped on Tuesday towards $0.89 against the greenback. Analysts are predicting the currency to drop further as the trade balance indicates a shortage.
The Australian currency dropped 0.36% lower to $0.8926 at the time of writing, dropping from $90.05, its highest level since Dec 12. While the total value of trade between Australia and China, its biggest trading partner, declined for the first time in five months.
“It’s notable that speculators continue to punish the Aussie dollar even though there seems to be no fresh reason to do so,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. “It provides us a reminder that 90 U.S. cents look as though it is hard work near term. On the downside, it’s fair game anywhere to about 88.50.”
The yields on 10-year Australian government debt dropped by 0.06% to 4.32%, down from the previous reading of 4.415, the highest since Dec 9.
Reserve Bank of Australia Governor Glenn Stevens has been set on strengthening the nation’s currency. “I thought $0.85 would be closer to the mark than $0.95,” Stevens said in an interview, “To the extent that we get some more easing in financial conditions, at this point it’s probably more preferable for that to be via a lower currency at the margin than lower interest rates,” Stevens added.
The trade deficit slid from the previously revised 358 AUD million to 118 AUD million in November, according to reports from the Australian Bureau of Statistics on Tuesday. The reading came in lower than $300 million deficit forecasted by analysts.
Exports increased by $94 million in a month to approximately $27.27 billion in November, while import came in 1% lower to $27.49 billion.
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