The sliding currency is hurting consumers and investors. Here’s how to limit your losses.
The Australian dollar’s long dive may see the local currency dip into the 50 US cent range before coming to rest, say some pundits, with consumers, online shoppers and overseas travellers likely to experience sharp price rises.
The bearish outlook on the Aussie currency is being fuelled by expectations that other developed economies are likely to grow faster in the next few years while the local economy tries to adjust to the downturn in commodity prices.
The currencies of commodity-based economies, such as Australia, are also expected to slide further as the US begins to increase interest rates.
Notwithstanding, the Australian dollar rallied on Thursday against the US currency after the release of lower-than-expected jobless figures.
But most currency analysts expect the rebound to be short-lived, with the Aussie expected to lose ground against most major currencies, including the US dollar, in 2016.
The sliding currency is having a big impact on the decisions of investors and consumers.
The Aussie dollar has already fallen more than 20 per cent against most major currencies since 2013 and this has prompted most funds to increase their investments in overseas equities to stem the impact on members’ returns.
Consumers can shield themselves
While there are some respected analysts who are suggesting that the Aussie may be close to bottoming, a leading global currency services provider, Macro Currency, indicated on November 11 that it could fall below 60 US cents.
If that happens, the implications for consumers could be significant:
• The cost of most imports, including cars, computers and televisions would probably rise;
• The cost of taking an overseas holiday will increase because travellers will need more Australian dollars to pay for accommodation and other services that are priced in foreign currencies; and
• If you’re planning to transfer a fixed amount of foreign cash overseas to a relative it will cost you more.
The weakening currency means it might be cheaper to buy high-value consumer items now, rather than in six months when the dollar might have slipped further.
If you’re planning to take a foreign holiday some time in 2016 you might consider pre-paying your air tickets and accommodation now.
You can also convert your spending money from Australian dollars into the currencies of the countries you will be travelling to.
Pre-paid travel cards allow you lock-in today’s exchange rates and draw down up to three years later.
While the fees on travel cards can be hefty, most can be loaded with money in different currencies. For example, ANZ’s travel card can be loaded with up to 10 currencies.
Investors can Benefit too!
Those that are invested in overseas markets such as the US may consider the benefits in delaying the sale of offshore assets. With a falling dollar there may be a benefit in obtaining more Aussie dollars when they convert back.
Likewise those investing overseas should buy now before any further devaluation occurs to get a relatively higher buying power.
Now is a great time to leverage off the opportunity of Aussie dollar becoming weaker.