The Australian dollar is trading sharply lower today after Reserve Bank of Australia board member John Edwards mentioned he would be comfortable with the local currency trading substantially lower.
At 9.13am (GMT) the Aussie dollar was trading at US 71.14c down from US 71.56c in yesterday’s trade.
Mr Edwards told the wall street journal that he would like to see the Australian dollar trading at around US65c which is well below its current levels although he doesn’t think it will fall that far anytime soon.
His remarks echo many other analysts who see the usual correlation between the iron ore price and the Australian dollar breaking apart which in itself should see the currency lower at this stage.
Historically the price of Australia’s biggest commodity and the Australian dollar have fallen in tandem with each other.
“It does look like the Australian dollar has found a base, and I guess I would say I still think it is a bit too high,” Mr Edwards said.
“If it was driven entirely by commodity prices, it certainly should be lower,” he also noted.
Also pressuring the Aussie dollar today is the fall in oil prices overnight after remarks by Saudi foreign minister Adel al-Jubeir who said that “supply and demand by market forces” would determine the oil price.
The comments seemed to have all but finished the apparent deal between Saudi Arabia and Russia to cut output and freeze the oil price
Oil prices eased overnight which put pressure on commodities and commodity currencies, such as the Australian dollar, following comments from Saudi Arabia that all seemingly dashed hopes of a deal to strike a freeze in production to January levels.
"The oil issue will be determined by supply and demand and by market forces. The Kingdom of Saudi Arabia will protect its market share and we have said so," Saudi foreign minister Adel al-Jubeir reportedly said.