UPDATE: CARS, clothes, and your next overseas trip are all set to become more expensive as the dollar plummets towards US70 cents.
But the price of petrol will fall, creating a silver lining for consumers.
The Australian dollar plumbed a fresh six-year low yesterday morning, when it reached US70.44c — its lowest mark since April 2009 — as it was hit by the global share market ructions.
Last night had settled at about US71.8c.
The Australian market looks set to open lower today after Wall Street fell for the sixth straight session, with the Dow posting another triple-digit decline after a morning rally fizzled.
At 6.45am the share price index futures contract was down 51 points at 5,076.
The market continued its wild ride yesterday, as local shares surged 2.7 per cent in their best rally in four years, even after falling 1.5 per cent in early trade.
The benchmark S&P/ASX200 index closed at 5137.3, up 136 points.
The market made back $37.3 billion of the $59 billion that was stripped from share values on Monday.
Banks were winners: Westpac gained $1.45, or 4.9 per cent, to $30.90; NAB $1.38, or 4.6 per cent, to $31.09; ANZ $1.08, or 4 per cent, to $27.99; and the Commonwealth $2.61, or 3.6 per cent, to $75.08.
Most Asian markets were also stronger, recovering from steep falls sparked by concerns about China’s economy.
China’s main stock market index fell for a fourth day, plunging 7.6 per cent to an eight-month low.
Chinese stocks have plunged over the past two weeks, despite a multi-billion-dollar government effort to stop a slide in prices.
Investors are also worried about China’s yuan currency, after a surprise devaluation of near 2 per cent on August 11.
France’s Economy Minister, Emmanuel Macron, yesterday said China’s faltering growth posed a threat to a recovery in the global economy.
The more volatile market has led to predictions the Australian dollar will hit US70c by the end of the year, and US68c by March next year.
Traders are jumping out of the currency as the prices of major exports, such as coal and iron ore, fall, instead turning to “safe haven” currencies such as the US dollar.
Because the dollar will pack less of an international punch, economists say prices of imports — everything from clothes, cars, whitegoods and electronics — will rise.
But fuel prices could sink dramatically.
“A weaker currency does make overseas travel more costly and may mean dearer imported goods,” said Commsec’s chief economist, Craig James.
“The good news for motorists is that global oil prices are falling. There is too much supply of oil globally and not enough buying.’’
He said petrol prices could fall as low as $1.10 or $1.15, “putting extra spending power back in pockets”.
Unleaded petrol was selling as high as $1.19 in Melbourne yesterday.
Westpac head of currency Rob Rennie said that Australia’s long-besieged manufacturers would get a valuable boost as their wares suddenly traded at cheaper prices internationally.
Mr Rennie said the period of the Aussie dollar being above parity had hurt exporters, and the decline would help those suffering.
“We know why it was (above parity) — we were in the middle of a resource investment boom,” he said.
“But as we see it weaken, it will be important — as the Reserve Bank reminds us — to help the economy adjust.”
Extracted in full from: heraldsun.com.au