The Australian Dollar has weakened during the course of last week as the Chinese central bank has continued to weaken the Chinese Yuan. As Australia’s biggest trading partner the weakening of the Yuan has meant it is more expensive to buy Australian exports which has led to less money flowing in to the economy down under and hence a drop in the Australian Dollar exchange rate.
The reason for the devaluation of the Yuan was owing to the Chinese economic slowdown. Official reports are that Chinese GDP is 7% and the weakening is an attempt to stimulate an export-led recovery for the world’s second largest economy.
The RBA announce their own minutes tonight from this month’s meeting and this could give us an insight as to when they may think about an interest rate cut down under. I think it is inevitable that the RBA will have to cut interest rates over the next few months as the economy is having problems and with China slowing down I think they will be left with little choice but to cut rates in the future.