By Kwedu News
The Australian dollar has plummeted to a five-year low, echoing pandemic-era levels, as the escalating US-China trade war impacts the global economy.
The currency’s value has dwindled to 60.5 US cents, its lowest point since April 2020.
At the heart of this downturn is the intensifying trade standoff between the US and China.
Beijing’s recent 34% tariff hike on US imports, retaliatory measures against similar US levies, has further strained the relationship.
This tit-for-tat escalation, which began with Donald Trump’s inauguration, now threatens to destabilize China’s economy and, by extension, its currency, the Yuan.
The Australian dollar’s close ties to the Yuan make it vulnerable to China’s economic fluctuations.
As Janet Mui, a macroeconomist, notes, “China is facing critical economic struggles.”
Its efforts to re-diversify supply chains through Southeast Asia to evade US tariffs are now being thwarted.
Greg Jericho, chief economist at the Australia Institute, explains the trickle-down impact:
“When the US raises tariffs on Chinese imports, the value of the Chinese currency needs to fall to maintain the same price. This, in turn, affects the Australian dollar.”
A weak Australian dollar makes imports pricier, straining household budget.
Jericho warns that petrol prices, which are heavily reliant on global markets, will be significantly affected.
Other imported goods, such as non-essential items, may also increase in cost.
The Australian dollar’s decline is further complicated by the Reserve Bank of Australia’s (RBA) upcoming policy decision.
With inflation easing and labor demand weakening, investors anticipate a potential policy easing in the coming months.
As the RBA weighs its options, the Australian dollar’s value will remain precarious, analysts say.
