Australian Dollar Weakness
Chart of the Week 04 Jun, 2010
The Australian and Canadian dollars are regarded as the ‘commodity currencies’ and generally correlate closely. Accordingly, it is interesting to examine their relative performance since the announcement of the proposed resources super profits tax – as outlined in the following chart:
Source: RBA, SR
It is evident that during the past month or so that the Australian dollar has weakened by around 7% relative to the Canadian dollar – which we largely attribute to the uncertainty surrounding the introduction of the new tax and its impact on the value of mining companies. This is consistent with anecdotal evidence of a massive flight of capital out of Australia over the same time frame.
An examination of the Trade Weighted Index performance portraits a similar picture as illustrated below:
Source: RBA, SR
