Lightning risk to the Australian dollar

If terms of trade follow historic cycles, an enormous adjustment could see the dollar fall as low as 50 US cents in 2015. Meanwhile, mining investment looks increasingly shaky.

Fortunately I have never been struck by lightning. But last night at the CEDA dinner, when Reserve Bank Governor Glenn Stevens put two graphs on the screen and later declared that our dollar was "a little on the high side” it felt like a lightning strike.

Suddenly I realised what could happen to Australia in 2015 given the ominous events taking place in 2012. The dollar would fall dramatically, perhaps to 50 US cents.





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