Westpac on the Australia dollar: “The exchange rate and the big pivot”

An extended note from Luci Ellis, Chief Economist Westpac Group, Westpac.

In brief:

• A depreciating exchange rate sometimes gets interpreted as a ‘vote of no confidence’ in that economy or currency. In fact, it is often a necessary and welcome shock absorber.
• future growth in export volumes is mostly going to have to come from somewhere other than the current top four exports.
• Australia is going to need to pivot.
• The good news is that history shows that it can, and the behaviour of the exchange rate will help it navigate that period of change.

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While the note doesn’t provide a forecast for the AUD it reads to me like WPAC is expecting the currency to be lower for longer.

This article was written by Eamonn Sheridan at www.forexlive.com.