How Aussie Dollar ETF Copes With Changing Times

March 10, 2009 at 1:00 am by Max Chen

ETF australian dollar The Australian dollar, and related exchange traded fund (ETF), may see the deleterious effects of a slowing economy and rising bad debts.

The Australian dollar, or “Aussie,” is forecast to fall 17% this year against the U.S. dollar and it is estimated that the Aussie will depreciate to 53 U.S. cents this year, writes Candice Zachariahs for Bloomberg. The weakening Aussie is a result of the Australian Reserve Bank cutting interest rates by 4% from September to February.

After a drop of 35% since hitting a 25-year high back in July, the Aussie may further depreciate as the country tackles its external debt that is around 89% of its GDP. It is thought that 34%, or $287 billion, of total external debt are in short-term loans.

In response to shrinking exports and increased pressure to further cut rates, the economy contracted 0.5% in the fourth quarter, a first in eight years. It is believed that the downward economic trend is likely to increase as a result of a long-reaching financial debacle.

Exports diminished by 5% with coal shipments down 19%. The trade surplus dropped to $624 million in January compared to earlier forecast of $704 million. It is predicted that there will be a $384 million deficit in 2009.