Australian dollar weaken on US strength

Financial and commodity markets analytics

The Australian dollar is weaker today after renewed strength in the US dollar and a fall in the Kiwi currency after new rules were introduced targeting foreign investors.

In early morning trade, the Aussie dollar was trading at US80.10c down from US80.30c on Friday.

Westpac chief currency strategist Robert Rennie said the New Zealand dollar reacted negatively to the new rules, which didn’t help the Australian dollar.

"Over the weekend New Zealand announced changes to capital gains tax on investment properties that's seen a weaker New Zealand dollar," he said.

"We've also seen a bit of US dollar buying generally going through this morning as well and that is leading currencies lower as well." He added.

In a speech today RBA deputy governor Richard Lowe noted that the recent rate cut from the RBA was not meant to encourage consumers to go on a spending spree,

It’s unlikely to be in Australia's long-term interests to engineer a consumption boom by encouraging people to borrow large amounts against future income," he told a gathering of chief financial officers in Sydney on Monday.

"This is especially so when debt levels are already high and prospects for future income growth are not as positive as they once were”.

He also noted that the central banks was trying walking a fine line with the aim of finding the correct balance and leaving open the possibility for a further rate cut if needed,

"The RBA's recent decisions have sought to strike a prudent balance – to help encourage consumption growth and thus business investment, but avoid the type of imbalances that could cause problems later on” he said

"We will continue to assess that balance carefully."



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