December 19th 2024.
The value of the Australian dollar has recently taken a significant hit, dropping to its lowest point in two years. This decline can be attributed to the Federal Reserve's decision to decrease interest rates in the United States. As a result, the exchange rate between the Australian dollar and the US dollar has fallen to around 62 cents, the lowest it has been since October 2022. Additionally, the Australian dollar has also dropped below 50 pence against the UK pound for the first time since the pandemic began.
Not only has the currency been affected, but the local sharemarket has also experienced a downturn. By midday today, the ASX200 had fallen by 1.7 per cent, reaching its lowest level since the first week of November. This trend was sparked by the US Federal Reserve's announcement of a 0.25 per cent interest rate cut, the third cut this year. However, the central bank also projected that there would only be two more cuts next year, a change from their previous estimate of four cuts. Federal Reserve Chair Jerome Powell stated that this decision was influenced by higher inflation readings and the expectation of even higher inflation in 2025. He also noted that the current interest rate is closer to the neutral rate, which is another factor in the Fed's cautious approach to further cuts.
The impact of the Federal Reserve's decision was felt on Wall Street, with the US market experiencing its worst day in four months. The Dow Jones Industrial Average closed down over 1100 points, approximately 2.5 per cent, while the Nasdaq composite saw an even larger drop of 3.5 per cent. These effects were also felt by Australian investors, as the ASX saw a slight decline yesterday followed by a more significant drop the next day.
Despite these setbacks, there was a glimmer of hope for the Australian dollar as it saw a sharp increase against the New Zealand dollar. This was due to the news that New Zealand had entered a deep recession, with a 1 per cent decrease in GDP for the September quarter. In the midst of these changes, Australians can stay up to date with the latest news by downloading the 9News app. Whether it's breaking news, sports, politics, or weather updates, the app provides notifications straight to your smartphone. It is available for download on both the Apple App Store and Google Play.
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