Australian inflation rate’s slowdown (1.9%) has pushed the Australian Dollar lower against most currencies yesterday. The small slump against global currency bask adds on to a relatively bad year for the Aussie Dollar. Trump’s tariffs on China have already had an impact on Chinese economy, and majority of experts would agree that if the trade war persists, the Americans will end up having the upper hand. That pose a huge threat to the Australian economy, being one of China’s most prominent trade allies, and these concerns reflect in pricing.
Australian Dollar Exchange Rate – This Year
Before we delve into the Australian dollar predictions for November and start speculating about what may and may not happen, we should begin by looking at the Australian Dollar trends for 2018.
- AUD/USD Exchange Rate: Started at 0.77 and climb all the way through to 0.81 circa end of January 2018. After peaking, it started declining very slowly, until meeting 0.71 this week.
- AUD/EUR Exchange Rate: Started at 0.66 and stayed at 0.64 to 0.66 throughout the year until September where it hit the annual low of 0.61. It is currently at 0.62.
- AUD/NZD Exchange Rate: Started at 1.11 and went as low as 1.05 in April. Has been slowly recovering since then, and has moved between 1.08 and 1.09 throughout last week.
- AUD/JPY Exchange Rate: Started the year at 87 and slipped to 80-81 by March. Has been relatively steady since then with current Australian Dollar to Yen rates of 80.
- AUD/GBP Exchange Rate: Started at 0.58 and stayed at the 0.55-0.59 range throughout the year (currently 0.55).
The bottom line on the AUD is that it is one of the least volatile currencies in the world. The biggest shifts throughout the year were in the AUD to USD exchange rate, due to U.S Dollar volatility (most recently as a result of a hawkish Fed) rather than as a result of something to do with Australia. It’s true that Australia’s inflation could have been better, and that a struggling China would influence the AUD negatively, but Australia is still safe and sound when you look at current global turmoils.
What’s Ahead in November?
Based on the hypothesis that the AUD currency pairs generally quite stable, we would have to look at factors that could influence the foreign exchange rates outside of Australia.
UK: The biggest volatility is going to be on the Australian Dollar to British Pound rates when Brexit is announced. A no deal Brexit should push the rates higher by 5% to about 0.59, or even more. We wrote about this topic in detail.
USA: The stock market correction is instilling some fear in the hearts of investors. The Vix is still under 25 points, but 2-4% of additional slump will push it all the way to 50%. To add to that, you have President Trump trying to interfere with monetary policy and publicly calling out the Fed. It wouldn’t take much for money to start flowing out of the USA, but it is unlikely anything drastic will take place in November
Euro Zone: With Italy’s budget still not being approved and overall negative sentiment, there is a toxic potential for the EU in the coming month. I could see the EU tearing apart in the coming years, and the process may begin as early as the UK announces a no-deal agreement.
For NZ, Japan and other regions, there are, as always, planned events on the economic calendar. Later on in November, Japan will announce its GDP growth, and NZ has an interest rate decision coming up in a week. I don’t think we are not expecting drastic new on any front.
AUD Exchange Rate Predicition
- AUD/USD Exchange Rate: US Dollar is expected to continue gaining, so we predict a 0.69-0.70 rate.
- AUD/EUR Exchange Rate: Will climb to 0.65-0.66.
- AUD/NZD Exchange Rate: Will remain in the 1.07 to 1.09 range.
- AUD/JPY Exchange Rate: Will stay in the 80-82 range.
- AUD/GBP Exchange Rate: Will climb to 0.59 to 0.62 after a no deal is announced.
Should I Exchange my Australian Dollars?
If you want to speculate on the exchange rates for next month that is one thing, but if you are checking for the Australian Dollar exchange rate prediction because you need to send or receive payments in FX involving the AUD, we recommend not to make any rash decision in that regard. There is a lot of chatter about the Australian Dollar losing it but there is still no data to support it. The Australian Dollar is acting completely neutrally. Advanced payment hedging can be made using forward contracts and they enable small business owners and individuals to prepare precisely for the payment’s date knowing it for up to 24h in advance.