Australian Dollar Weakens as Prices of Gold and Copper Declineadmin
The Australian dollar fell for a second day after a decline in the price of commodities the nation exports, including gold and copper.
The currency reacts to the price of raw materials because commodity sales account for 13.5 percent of Australia’s economy, the world’s 15th largest. Gold, of which Australia is the world’s second-biggest producer, is down 2 percent this month and copper declined for a third session.
“Commodities are struggling and that’s a dampener on the Australian dollar,” said Bob Cunneen, senior economist at AMP Capital Investors in Sydney.
The local currency bought 78.31 U.S. cents as of 3 p.m. in Sydney compared with 78.44 cents late in Asia yesterday. It may drop to 76 cents in the next four months, Cunneen said.
Gold futures for February delivery declined $1 to $625.90 an ounce on the Comex division of the New York Mercantile Exchange yesterday. Copper futures for March delivery fell 1 percent to $2.5775 a pound in New York. Prices have dropped 3.2 percent in three sessions.
The Reuters/Jefferies CRB index of 19 commodities futures fell 1.2 percent yesterday and has lost 11 percent since Dec. 1.
“Falling commodity prices mean worsening terms of trade for Australia,” said Hans Guenter Redeker, head of currency strategy in London at BNP Paribas SA. “That will hurt the currency.”
Australia’s terms of trade, which represents the relationship between the price of exports and imports, rose 1.1 percent in the September quarter to the highest since 1959, the Australian Bureau of Statistics said Dec. 6.
Concern that global growth will slow may hurt high-yielding currencies like the Australian dollar, Redeker said.
“If the international risk-appetite declines, it will be much harder to attract capital and the Australian dollar will fall.” He predicts the currency may slide to 65 cents in the next 18 months.