Home > Latest News > A$ Wobbles New Pain Point For Suppliers $0.67 Tipped

A$ Wobbles New Pain Point For Suppliers $0.67 Tipped

Distributors who are already facing rising price battles due to rising logistic, freight and component costs are now facing a falling Australian dollar.

The A$ is set to fall to $0.67 according to analysts after trading at $0.74 this time last month.

The fall is due to the growing strength of the US dollar fuelled by rate hikes and economic recovery, weak investor sentiment over China’s restrictive zero-Covid policy and less than expected tightening by the RBA.

The Australian dollar was trading near US69.4c at the close of the US market on Saturday, with a further weakening set to impact CE and appliance prices in the second half of the year.

“We see further downside in the AUD to US67c over the coming months,” Morgan Stanley says in a note to clients.

“We expect that will mark a trough – and that the currency can return to the low 70s range it has favoured recently, reaching 72c (by) mid-2023.”

Adding further pressure Morgan Stanley is forecasting a cash rate of 2.25 per cent by the end of 2023, 1.9 per cent above its current level but over 1 per cent less than market pricing implies, “reflecting the downside risks to growth and the housing market”.

The prospect of the fastest increase in Fed rates in decades is driving up the US dollar and taking the heaviest toll on riskier assets, such as the Australian dollar and stocks.

Worries about a slowdown in China have undermined the local currency which is used as a liquid proxy to hedge against weakness in China claims observers.

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