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5 November, 2018

Here’s how the US trade war with China is affecting the Aussie dollar

If you’ve got any notes left over from a trip to the US, now is the ideal time to sell them, according to Travel Money Oz, as the Aussie dollar falls against the USD.

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Last week saw the AUD, which is underperforming against most of the major currencies, fall from 0.7105 to 0.7060 against the USD.

Kelly Spencer, General Manager for Travel Money Group said the drop followed last Friday’s announcement of the weakest AUD level against the USD since February 2016.

“There wasn’t a single key trigger behind this performance; rather it comes as a flow on effect off the back of a strong USD and poor CNY performance,” Spencer said.

“Both the Aussie and Kiwi currencies have fallen steeply against the USD since the start of the year.”

This week the market has seen upwards pressure on the USD, after US domestic data showed wages and salaries grew at an above average annual pace of 4.6 per cent in September (it has hovered around 4.2 per cent since 2011).

“For travellers, it is a great opportunity to capitalise on the strong USD and sell back any notes they have left over from their trip to the States,’’ Spencer said.

“The average Aussie traveller returns home with $184 worth of travel money. Capitalising on a stronger holiday currency when selling back can definitely soften the blow of your post-holiday blues, and help you start saving for your next adventure,’’ she said.

Markets continue to keep an eye on the US/China trade war, especially amidst reports that President Trump is preparing to announce tariffs on all remaining Chinese imports if his G20 meeting with Chinese Leader Xi Jinping fails to ease trade tensions.

“Considering there are already tariffs on $250 billion worth of Chinese exports to the US, this would be a real blow to the Chinese economy and the Yuan,’’ Simpson said.

“The trade war and its resulting downwards pressure on the CNY is a challenge for the AUD, as China is Australia’s top trading partner.

“A decline in demand for Chinese imports in the US means a decline in the demand for Australian exports to China; and less demand for exports means less demand for our currency.”

“This is evident, as Friday’s drop in the AUD mirrored movements of the Chinese Yuan which fell to its weakest level in over a decade against the USD,’’ she said.

“For those looking at purchasing currency for an end of year holiday, or perhaps planning a trip next year, it is definitely worth keeping an eye on how the AUD is performing.

“Educate yourself, and learn what you can about foreign currency forecasting. This knowledge can potentially end up saving you some solid coin, which equates to more poolside cocktails when on holiday,” Spencer said.

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

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