Janet Yellen has emerged as another problem for commodity producers, particularly those in Australia, as her caution over interest rates has effectively weakened the U.S. dollar.
The Federal Reserve chair said on Tuesday that the U.S. central bank should “proceed cautiously in adjusting policy” given the risks to the economic outlook.
This signals that U.S. interest rates may not rise as quickly as many in financial markets had expected, resulting in the U.S dollar losing ground. The Australian dollar gained almost 2 percent from its low on Tuesday to its high so far on Wednesday of 76.48 U.S. cents, and it is up 5.3 percent so far this year.
The gain so far in 2016 stands in sharp contrast to the Australian currency’s 37.6-percent drop between its post-2008 recession high of about $1.10 in July 2011 to the low below 69 cents, reached in January this year.
This currency has been on a rising trend since the January trough, and this is bad news for Australian commodity producers, who have been relying on a weaker currency to help them drive cost efficiencies in their bid to survive low prices.
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