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Monday, May 17, 2021

Australian political limbo drives dollar lower

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Australian political limbo drives dollar lower

The Australian dollar weakened after the country’s election over the weekend ended up too close to call, raising the prospect of a hung parliament.

The benchmark ASX/S&P 200 also fell on Monday by 0.5% to 5,222.20 points.

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Neither the ruling Liberal-National Coalition nor the opposition Labor parties were able to secure an outright majority.

The result won’t be decided until at least Tuesday, which is when vote-counting resumes.

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The local dollar started about half a US cent lower around $0.7435 but later edged back up to $0.7469 in light trading.

The uncertainty and an increased risk of Australia having it’s “AAA” credit rating cut has “dented” the country’s currency, Vishnu Varathan from Mizuho Bank said.

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Australia’s central bank is also expected to hold fire at its policy meeting on Tuesday, analysts Capital Economics said:

“The fallout on the economy and financial markets from the uncertain outcome of the Federal election will probably be relatively mild and short-lived and is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50%.

“It is concerns over the weak outlook for inflation, not the political outlook, that will trigger a rate cut to 1.50% in August,” it said in a report.

Elsewhere in Asia, Japan’s Nikkei 225 is down 0.6% and Korean stocks are trading flat.

Online Source

The Indian Telegraph Sydney Australia

 

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