Aussie dollar plummets to five-year low against greenback

WestPac sees little hope for AUD reversal

Aussie dollar plummets to five-year low against greenback

The aussie is currently trading at a near five-year low against the US dollar in the wake of another knock-out US jobs report released on Friday night.

Non-farm payrolls data from the US Bureau of Labor Statistics revealed that the US economy added nearly a hundred thousand more jobs than expected in December, marking the strongest month since March 2024.

It was nothing less than a “blockbuster” report that reaffirmed “the US economic exceptionalism narrative”, said WestPac analysts.

Also delivered late Friday, the US unemployment print came in at 4.1%, a slightly stronger result than the 4.2% forecast.

This flurry of hot US job data threw a spanner in the works for the US Federal Reserve’s rate cut agenda, causing a robust repricing of the greenback across the global currency markets.

Australia was no exception, with the AUD/USD pair falling to $0.615 at the time of writing- the lowest exchange rate since March 2020.

While all currency majors are struggling to compete against the US dollar, the aussie has been further weakened by “fears over economic growth in China and the repricing in domestic interest rate expectations”, said WestPac economist Jameson Coombs.

“The weight of these forces leaves little room for a significant near-term reversal for the Aussie,” he added.

Australia has lagged behind its central bank counterparts in implementing interest rate cuts, with the cash rate remaining at 4.35% since November 2023 while the US, UK and Europe have all slashed rates in recent months.

However, ANZ analysts expect the Reserve Bank of Australia to cut the cash rate by 25 basis points when policymakers convene in February.