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Dollar falls on Glenn Stevens’ warning

For the first time in three weeks, the Australian dollar has fallen below the US95c mark following effective ‘jaw-boning’ by the Reserve Bank of Australia boss, Glenn Stevens.

Whilst the RBA has remained hesitant to make any further monetary policy adjustments to put a downwards pressure on the local currency, Stevens warned currency investors that current exchange rate levels were not supported by productivity and cost dynamics, and that it would fall in value when the US Federal Reserve inevitably tapers its bond buying program.

Stevens said, “It seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today” – the addition of the word ‘materially’ suggests that it could fall quite a few cents from where it is today.

This will come as good news to exporters such as BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG), which all heavily rely on foreign customers for their revenues.

On the other hand, Deutsche Bank currency strategist John Horner believes that the fall will only be short-lived due to the recent strength in China as well as the current strength of the property market, which could have it nearing parity again within weeks.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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