The Aussie dollar is showing some encouraging signs of softening, quoted this morning at US100.83c, down almost a cent on this time yesterday.

While Tuesday’s Reserve Bank decision to lower interest rates to a record low cash rate of 2.75pc was a strong contributing factor, there is a view that market fundamentals may also push the currency lower.

The A$ has traded as high as US 105.4c within the last four weeks, but the recent trend, if it persists, could provide considerable relief for exporters battling against an uncompetitive exchange rate.

Sydney meat trader Stuart Hanna, director of Sanger Australia, said the A$ only dropped about 70 points (US0.7c) immediately after the RBA interest rate announcement.

“Then some better employment figures came out yesterday, and up it went again to 102.5c,” he said.

“We thought it was all over, but suddenly a bit more strength in the US, and a few analysts calling the commodity market a bit ordinary, and down it came again,” he said.

“The Aussie dollar this morning is as low as it has been in 11 months, so let’s hope it stays that way, or drifts further.”

Also hitting sentiment towards the A$ was a report this week from the Fitch rating agency that warned Australian banks that their credit rating could be at risk unless they changed their funding mix, moving away from short-term deposits and more towards long-run wholesale funding.

A credit downgrade on the banking sector, for so long the darling of Australian markets and a target for global investors, would clearly be negative for the A$. 

The recent A$ performance is one factor behind a growing anticipation that Australian grinding beef exports into the US may increase in both price and volume in the next few months. See Stuart Hanna’s comments on that subject on Beef Central on Monday.

Is the A$ on the slide?

A number of leading international commentators are now predicting further softening in the A$ value.

Business Spectator analyst Stephen Koukoulas said while forecasting currencies is hazardous, the recent influences on the A$, its new fall and the change in sentiment suggested the US96c target that Westpac’s economist, Bill Evans had forecast for 2014 would be hit much earlier than that.

"And the fall could well be much sharper," he said. 

US investment legend George Soros is reported to have made a $19 million profit this week, wagering on a RBA interest rate decline, and subsequent easing in the Australian dollar. He thinks it will ease further.

Another respected US investor, Stanley Druckenmiller, founder of Duquesne Capital, also came out this week calling an end to the commodity ‘super cycle’ and recommending investors short the A$.

Speaking at the Sohn investment conference in New York, Mr Druckenmiller argued that “China had misallocated resources and misread signals”, whereas “commodity producers ramped-up production and misread the situation.”

As such, the current supply demand situation in commodities was ‘deadly’, and the commodity ‘super-cycle’ was now at an end, he suggested.

The past two years are not a correction, but a trend,” Mr Druckenmiller said.

He urged investors to avoid commodities and go short on the Aussie dollar.

“We think the Australian dollar will come down and will come down hard.”

Mr Druckenmiller famously earned $1 billion for his Quantum Fund by betting against and forcing a devaluation of the British pound in 1992.

“The hedge fund sharks look to be circling the A$,” commentator unconventionaleconomist.com said this week. “We don’t know when the A$ correction will come, but when it does it will likely be swift.”

EYCI slide continues

While recent currency movements have been encouraging, the Eastern Young Cattle Indicator continued its long slide this week, falling below 300c/kg for the first time since December 2009.

The market closed on Thursday at 285.75c.

MLA’s weekly report issued this morning made the point that while the EYCI is currently at a three-year low, when comparing to similar years where widespread dry conditions were experienced, the price trend is similar.

The EYCI in the very dry 2007 year averaged 317.61c, with a low-point of 272.5c. Similarly, in the dry 2009 year, the EYCI reached a low of 277.75c, to average 317c/kg.

“While the EYCI reached a low point this week, so far for 2013, the year-to-date average is 323.44c/kg, above that of both 2007 and 2009,” MLA pointed out.