The Australian dollar's plunge to a seven-year low is turning out to be a blessing as China steers its slowing economy away from the heavy industries that helped fuel a mining boom Down Under.
It's more than four years since a record-high Aussie threatened to destroy manufacturing and hamstring the economy. Instead, the currency's steepest three-year slide since it was floated in 1983 is working its magic - a weaker local dollar has spurred record tourist arrivals and education income. And it's tempered the drag from iron ore's plunge to unprecedented lows while making the nation home to the world's lowest-cost miners.
Australia stands out in getting the currency boost it needs at a time when economies the world over are grappling with exchange rates considered undesirable. The Aussie is in line with economic fundamentals, after being 25% or more overvalued in 2013.
"The fall in the Australian dollar has helped support the recovery and restructure the economy, so it is a good example of how a floating exchange rate should act," said Greg Gibbs, director of Amplifying Global FX Capital in Breckenridge, Colorado, who has spent over two decades in the currency markets including stints at the Reserve Bank of Australia and with lenders in Sydney, New York, London and Singapore.
RBA Governor Glenn Stevens stopped calling for a weaker currency in August and subsequent declines drove the Aussie closer to fair value than at any time since the global financial crisis, according to a measure of purchasing power parity based on producer prices.
Mr Stevens pointed in December to new opportunities for growth as Asia's middle class demands more services, energy and food, filling the economic vacuum left by a contraction in mining investment.
The impact of the Aussie's decline has been particularly apparent in the "sizable contribution" of services exports to growth, the RBA said in November, acknowledging the labour- intensive sector's role in helping to push unemployment to a two-year low.
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It's more than four years since a record-high Aussie threatened to destroy manufacturing and hamstring the economy. Instead, the currency's steepest three-year slide since it was floated in 1983 is working its magic - a weaker local dollar has spurred record tourist arrivals and education income. And it's tempered the drag from iron ore's plunge to unprecedented lows while making the nation home to the world's lowest-cost miners.
Australia stands out in getting the currency boost it needs at a time when economies the world over are grappling with exchange rates considered undesirable. The Aussie is in line with economic fundamentals, after being 25% or more overvalued in 2013.
"The fall in the Australian dollar has helped support the recovery and restructure the economy, so it is a good example of how a floating exchange rate should act," said Greg Gibbs, director of Amplifying Global FX Capital in Breckenridge, Colorado, who has spent over two decades in the currency markets including stints at the Reserve Bank of Australia and with lenders in Sydney, New York, London and Singapore.
RBA Governor Glenn Stevens stopped calling for a weaker currency in August and subsequent declines drove the Aussie closer to fair value than at any time since the global financial crisis, according to a measure of purchasing power parity based on producer prices.
Mr Stevens pointed in December to new opportunities for growth as Asia's middle class demands more services, energy and food, filling the economic vacuum left by a contraction in mining investment.
The impact of the Aussie's decline has been particularly apparent in the "sizable contribution" of services exports to growth, the RBA said in November, acknowledging the labour- intensive sector's role in helping to push unemployment to a two-year low.
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