Aussie dollar falls to near parity with S$

Australian banknotes.
Australian banknotes. PHOTO: BLOOMBERG

The sliding Australian dollar has almost fallen to parity with the Singapore dollar and is now at six-year lows. One Australian dollar could buy about $1.01 Singapore dollars yesterday, the weakest it has been since 2009 and the depths of the financial crisis.

It is now down about 7 per cent against the Singdollar since the start of this year and 13 per cent since last July.

Families funding kids studying in Australia will enjoy getting more bang for their Singdollar and tourists will reap rewards as well.

But local companies with big investments in Australia could well take a forex hit when repatriating earnings, and expect fewer Australians splashing out in Orchard Road.

The once-mighty Australian dollar has been battered by slowing global demand for the country's commodities exports and a string of disappointing economic data over the past week.

A slowdown in China has been a major contributor to the Australian dollar's weakness, said Phillip Futures forex dealer Kwah Wee Hong.


Australian dollar on a par with Singdollar

"(This) led to a decrease in the demand for Australia's commodity exports, and declining commodity prices," he added.

Commodity prices are likely to remain low for the short to medium term so Australia's economy is likely to remain sluggish, he said.

This means the Australian dollar is expected to continue trading at or even below parity with the Singapore dollar over the next three months.

Australia's mining and agricultural sectors make up a significant share of the country's economy, with the products to be exported mainly to the East Asian market.

Economists say the outlook for the Australian economy remains cloudy, particularly as the commodities boom that fuelled the country's growth in the decade to 2013 is now over.

The tumult surrounding Greece's debt crisis is unlikely to have much real impact on Australia, however.

Even if a Grexit triggers a financial crisis and another euro zone recession, the resulting hit to Australia's economy would be negligible, according to a report from Capital Economics.

This does not mean that the outlook for Australia is rosy - a slowdown in economic growth from 2.7 per cent last year to around 2 per cent this year is still expected, the report said.

A version of this article appeared in the print edition of The Straits Times on July 04, 2015, with the headline 'Aussie dollar falls to near parity with S$'. Print Edition | Subscribe