The Aussie dollar’s plunge to a six-year low may not be all good news for the Reserve Bank.
While the Australian
central bank spent much of this year calling for a weaker currency to
help revive the local economy, the Chinese move to devalue the yuan that
sparked the most recent drop underscores the dangers posed by a
slowdown in the South Pacific nation’s biggest trading partner. It also
risks fueling beggar-thy-neighbor actions in other countries and putting
the brakes on a normalization of U.S. monetary policy.
China’s surprise
change to its currency regime on Tuesday rippled through global markets
as investors speculated the move was timed to combat the deepest
economic slowdown since 1990 for the world’s most populous nation. The
Australian dollar dropped 10 percent this year to 73.68 U.S. cents as of
10:30 a.m. on Thursday in Sydney, having touched 72.16 cents on
Wednesday, a level unseen since April 2009.
Source: Bloomberg
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