Agribusiness

A$ surge past US95c alarms beef exporters

Jon Condon, 19/09/2013

The Australian dollar has surged again overnight, washing away more than half of the recent softening in value experienced against the US currency, and with it, some of Australia’s improving beef export competitiveness.

After climbing well past US95c overnight, the A$ settled a little in trade this morning at US94.95c. That’s up an alarming US1.41c on this time yesterday.

The overnight movement was a hot topic among meat exporters attending this morning’s opening sessions of the Australian Meat Industry Council’s 2013 meat export conference on the Gold Coast.

“It’s frustrating, given the encouraging signs seen in currency value over the previous three weeks,” a prominent exporter told Beef Central this morning. “If it persists, it will definitely impact on prices received in A$ terms in international markets,” he said.

Ten days ago the A$ was trading in the low US89s, but has since lifted 6.3 percent, or US5.4c in a strong rally that is against beef exporters’ best interests.

In a market briefing this morning, National Australia Bank analyst Ray Attrill said one of the drivers was that contrary to expectations, the US Federal Reserve left its asset purchase program unchanged at $85bn/month after its Federal Open Market Committee meeting yesterday, dragging the US$ lower in value.

“The Fed wanted to see more evidence that the recent improvement in the US economy will be sustained before adjusting the pace of purchases. It is concerned that the rapid tightening of financial conditions in recent months could slow growth, while fiscal concerns were also raised,” NAB’s report said.

Following the decisions, the US Dow and S&P 500 indices hit record highs. The Dow was up as much as 200 points from its pre-announcement level.

“If the FOMC result means that the US$ remains under pressure, then the A$ is likely to now spend some time above US95c,” NAB warned this morning.

In turn, this will only add to the pressure for the Reserve Bank of Australia to cut interest rates again, given the domestic outlook for growth and rising unemployment, it said.

European currencies also surged higher against the greenback.

Almost half of the A$’s recent fall in value, from around US105c, has now been retraced, NAB said.

“Further currency strength will surely add some pressure for the RBA to cut interest rates again and sooner than the market expects,” Mr Attrill said.

Analysts are currently pricing a 26pc chance of a rate cut in November, a 54pc chance of cut by March and a 36pc chance of a rate hike by December, 2014.

  • More reports out of the AMIC export conference later today and tomorrow.

 

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