Australian dollar plunges and the central bank’s interest rate hikes did not help

The Australian dollar continues its slide and is heading for its lowest level in years. At the same time, the Reserve Bank of Australia (RBA) does not seem to have enough power to stop the slump.

The Australian dollar has fallen by around 3% since May. It has been put under pressure by the slowdown in the Chinese economy and the appreciation of the US dollar. Sustained increases in key interest rates, meanwhile, are doing little to stem the depreciation.

The Commonwealth Bank of Australia expects the Australian dollar to fall to 62 U.S. cents by early next year, the lowest level since April 2020.

The Australian dollar has been affected by the global economic downturn. As a commodity-linked currency, it is sensitive to global economic sentiment. The Australian dollar could face further problems this week when Australia reports another decline in jobs in August after an unexpected drop in July.

The Australian dollar and the U.S. dollar have been in a downtrend since mid-August. It is likely to hit the lowest support level from July at 0.6682 U.S. cents. A break of this mark could cause the Australian dollar to fall to 0.6464 US cents.

The Australian dollar weakened even though the central bank raised its key interest rate by a total of 2.25% since May in its last rate hike on September 6. The policy rate rose to a 7-year high, but the Australian dollar fell nearly 1% against the dollar.

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