Australian dollar trading is set to fall to a six-year low after the Reserve Bank’s announcement on Wednesday that the country’s central bank will no longer be printing cash.
“The Reserve Bank will no more print money,” the RBA’s governor, Glenn Stevens, said in a speech to parliament.
“In the past, the Reserve Board and the Reserve banks of Australia have both done so with great success.”
A decline in the dollar, which is used around the world, has been forecast to be as much as 8.4 per cent this year, and 7.9 per cent next year.
It would be the lowest since July 2018, when the Australian currency fell to a record low of $US1.2494.
“We are in uncharted waters,” said Andrew Haldane, senior currency strategist at BNP Paribas.
“This has happened at the highest level since the financial crisis and we are just now starting to feel the effects of the recession and the low growth.”
A dollar that loses some of its value may also weaken the dollar’s value in overseas markets.
The dollar fell sharply after the RBS announcement and has since rebounded.
US president Donald Trump has been criticised for his “fear mongering” over China’s currency manipulation, and the RBC governor’s comments came as the US Federal Reserve increased its rate hike forecast.
“Our assessment of China’s manipulation of the currency markets is that the US monetary policy stance is not as hawkish as we might have hoped,” Mr Stevens said.
“However, we remain hopeful that, with the expected tightening in global demand and with the recent improvement in economic data, the US central bank might reconsider its current policy stance.”