The Australian dollar has had a swift, hard fall. The currency, which fell through parity against the dollar a week ago, continued its decline on Friday, falling to $0.9762. Now, Goldman Sachs is predicting it could fall to as low as $0.80.
To give you a sense of how significant such a move could be, the Aussie traded at 1.05 against the dollar in mid-April. So a drop to $0.80 would be a 23.8 percent decline. In fact, Goldman said a short Aussie dollar position was one of its top trades for 2013.
Australia is one of the few countries with a triple-A sovereign rating. But central bank rate cuts have taken the wind out of the Aussie dollar's sails.
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Earlier this month, the Reserve Bank of Australia cut its benchmark rate to a record low of 2.75 percent. That's down from a high of 7.25 percent in 2008.
Weakness in Australia's commodities sector and in domestic consumption are also pressuring the economy. Gross domestic product is set to grow by 2.75 percent this year, according to the government, down from 3.1 percent last year.
"Australian activity is set to slow in 2013, as the peak in the mining investment boom passes, along with what we believe will be the inability of the non-mining sector to pick up the slack," Goldman analysts wrote on Thursday.
"A soft labor market and decelerating wages are likely to weigh on consumption, as will the ongoing fiscal consolidation; the latter will also curtail government spending."
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The analysts said that much weaker fixed investment was a manifestation of the tapering off of the mining investment boom. "Our forecasts for Australian activity stand in contrast to our expectations for most other economies, where we expect growth either to remain solid or expand," they said..
Investors have also been spooked by rumors that billionaire investor George Soros has taken a $1 billion position against the Aussie dollar.
According to Chris Weston, chief markets strategist at IG Markets, fair value for the Aussie, based on the terms of trade for its commodities, is around $0.9400.
"It's been a week to remember, especially for those who have Aussie dollar exposure. The kitchen sink has been thrown at the Aussie this week and finally the bond market has not been able to save the currency," Weston said on Friday. He added that the Aussie has been oversold, but warned that the market is short and any rallies will likely be sold by traders.