Weakened demand damages Aussie dollar

Weakened demand for resources has prompted a fall in the Australian dollar against the Greenback.

Weakened demand for resources as Asia meets its requirements for coal and iron ore has prompted a fall in the Australian dollar against the Greenback, an analyst told MINING DAILY.

The Australian dollar was trading at $US0.7948 yesterday, marking the end of a trading price above $US0.80 since June 09.

IBISWorld analyst Sam Ellis told MINING DAILY weakened demand for resources has forced the Australian dollar to fall and commodity prices to follow.

“Weaker demand [for resources] means investors are less inclined to buy Australian dollars to purchase commodities,” he said. “When demand [for commodities] eases, the dollar also weakens.”

Ellis said Chinese stimulus packages, which require significant amounts of coal and iron ore to kickstart construction, are partly to blame for the trend.

“The Chinese now have enough material to get infrastructure programs underway and have less need for Australian resources,” Ellis said.

“They are looking to their own stockpiles and resources to get construction started.”

As Australia’s major partners for iron ore and coal, Ellis expects China and Japan will lead a recovery to the market by boosting confidence in the resources market.

“Higher demand will drive change and Asian customers are well-equipped to do so,” he said.

He said investors will be more inclined to spend money as confidence finds its way back into the market, which will stimulate the market and boost the dollar value.

IBISWorld is unable to forecast market trends and Ellis said it is “unknown” when the dollar may recover.

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