the 80 cent mark — others aren’t so sure.
Daniel Been, leader of ANZ Bank’s FX Strategy Team, told Business Insiderthere was cause for concern.
“As was the case late last year when the AUD looked excessively weak, we do not think that the current state of affairs is sustainable,” Mr Been said.
“First, the AUD is currently at an extreme in term of its correlation to commodities, beta and the DXY, all of which have pointed to strength. If this correlation declines and rates — which are signalling weakness — once again become more important, then the AUD will likely fall.
“Second, should these strong correlations manage to hold, we see risks that, at least on a tactical basis, there is scope for commodities to ease, for risk sentiment to sour and for the USD to once again find its feet as the recent strength/weakness in all these factors is at a historical extreme.”
The Australian dollar experienced its largest weekly decline in more than a year thanks to its 1.5 per cent drop overnight.
It’s also expected to continue dropping as the Federal Reserve keeps pushing up interest rates and the Reserve Bank of Australia keeps borrowing rates low.
James Athey from Aberdeen Standard Investments in London, told Bloomberg commodities such as Australian iron ore had boosted the outlook of the country’s exports.
“In the medium term, the Australian economy does not welcome a stronger Australian dollar. Plus, I expect commodity prices to moderate,” he said.
Tony Bradley from the Sydney-based Hunter Burton Capital hedge fund, said the outlook is bleak for the Aussie dollar — and said it’s inevitable it will drop below 70 cents.
“As the Fed hikes and US rates overtake Australia’s, it will put pressure on the Aussie dollar, but the RBA doesn’t care,” Bradley told Bloomberg .
But it isn’t just the Aussie dollar taking a hit.
The US dollar fell to a more-than-three-year low against the euro on Friday, extending recent losses on expectations European Central Bank policymakers are preparing to reduce stimulus.
And earlier in the US, Wall Street had an absolutely shocker as the Dow Jones experienced its biggest one-day drop since the global financial crisis.
The Dow Jones has had its worst day in two years as worries about the impact of a tightening job market on the prospects for inflation sent investors fleeing.
Specialist Meric Greenbaum works on the floor of the New York Stock Exchange and saw the Dow Jones drop more than 600 points. Picture: Richard Drew
Specialist Meric Greenbaum works on the floor of the New York Stock Exchange and saw the Dow Jones drop more than 600 points. Picture: Richard DrewSource:AP
A surge in bond yields also meant the Down Jones Industrials Average lost 666 points — its biggest daily percentage loss in 20 months.
That plunge is also the biggest daily point fall since December 2008, in the middle of the financial crisis.
Quincy Krosby, chief market strategist at Prudential Financial, told The New York Post the drop had “caught the market off guard”.
Wages for America’s workers rose by 2.9 per cent in January — its biggest wage gain since 2009 — and the country added 200,000 jobs.
However, this good news sparked a cascade of panic-selling — leading to the Dow Jones tumble.
Cryptocurrency Bitcoin was also hit hard — sliding down to $8,000 after experiencing a mammoth drop in January.
— with Wires