The Australian dollar experienced a dramatic 9.2% decline in 2024, marking its worst annual performance in six years. Analysts predict the currency might fall further, potentially dropping below $0.60. Several global and domestic factors contribute to this downward pressure.
One major factor weighing on the Australian dollar is China's slowing economic growth. As Australia's largest trading partner, weaker Chinese demand directly impacts Australian exports. Additionally, concerns over a potential trade war between the US and China exacerbate uncertainties.
The Reserve Bank of Australia (RBA) is also playing a significant role in the currency's performance. The central bank's previous tightening policies supported the Aussie dollar. However, easing inflationary pressures and rising global risks are shifting expectations. Many economists believe the RBA may cut interest rates as early as February. This potential move could push the Australian dollar even lower.
On December 31, the currency hit $0.6179, nearing a critical support level of $0.6170. Market participants closely watch this level, as breaching it could lead to further declines. If this happens, the Australian dollar may revisit lows not seen since April 2020.
Forex strategists warn that the Australian dollar remains highly vulnerable. Gareth Berry from Macquarie Bank highlighted that the combination of global uncertainties and domestic challenges poses significant risks. Similarly, Westpac’s Richard Franulovich noted that easing inflation might prompt RBA rate cuts, adding more pressure on the currency.
In summary, the Australian dollar faces a challenging road ahead. Global economic trends and domestic monetary policy shifts will play pivotal roles in its performance.
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