Dollar settling down

ANZ currency strategist Andrew Salter says more large falls in the Australian dollar are unlikely, even if the official cash rate is cut again.

Don’t bet, as others have, on the Australian dollar falling further. Expectations of a rate cut at the next meeting of the monetary policy committee of the Reserve Bank of Australia may not have the downward pressure on the Australian dollar that many are betting on. 

Andrew Salter, the foreign exchange strategist at ANZ, has never seen such a volume of short positions on the Australian dollar – people betting on the currency’s fall (see David Gilmour's Four short-selling strategies in a volatile market). If the Australian dollar adds to its 13% plunge since April 11 there will be a so-called “short cushion” in the market. Those betting on the fall in the currency will find their bets covered by others with an opposite view, stemming any precipitous decline.

At 0949 AEST the Australian dollar was at US91.57 cents, down 0.2% from US91.76 cents yesterday, according to Bloomberg data. The currency has gained 1% since July 5.

“It’s hard for the [Australian] dollar to go lower,” says Salter.