That’s the opinion of one financial expert who says a buoyant greenback and continuing concerns about the Chinese economy could see the Australian dollar squeezed down.
The currency fell by more than 1 per cent overnight to a 10-month low of 63.58 US cents as the greenback surged to its highest level since March.
“I wouldn’t rule out it falling further … even to about 50 US cents,” David Llewellyn-Smith, chief economist at MB Super and Nucleus Wealth, said.
The US is the largest oil producer in the world and the value of its dollar was spurred by news that two other major producers – Saudi Arabia and Russia – were extending their voluntary oil production cuts through the end of this year.
The move will trim 1.3 million barrels of crude out of the global market and boost prices.
The price of crude oil soared to $US90 ($140) per barrel following the decision.
Llewellyn-Smith said the high oil price adds to inflationary pressures, including an elevated risk of more price pain at the petrol bowser for Australians.
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He also said uncertainty about the Chinese economy was another drag on the local currency.
There is speculation the Chinese government will be forced to intervene to stimulate demand after news that service sector activity in China’s economy during August dropped to its lowest level in eight months.
The emerging Asian superpower is Australia’s largest export market and the value of the dollar is heavily dependent on China’s appetite for commodities, such as iron ore, and coal mined in Australia.
Llewellyn-Smith said a collapse in global commodity prices caused by a failing Chinese economy would trigger further falls in the Australian dollar.
The ASX 200 index fell by 0.2 per cent on opening today.
