UBS: Lower dollar could have a BIG impact

UBS: Lower dollar could have a BIG impact. Since the resources boom peaked in 2012, financial conditions in the Australian economy have tightened. Historically, whenever the USD price of our commodities has fallen, the Australian dollar has declined with it, providing a cushion of support. However, that hasn't really happened this time around. The one thing that could save us is if the Australian dollar finally adjusts to the lower commodity price environment. A lower dollar would release the pressure on financial conditions that have been built up in the economy recently. There is even a suspicion within the RBA that the transmission mechanism through which a lower dollar effects the economy has sped up. If this is the case, a lower dollar may quickly translate into higher confidence, more jobs growth, higher retail spending, increased investment activity and ultimately higher earnings and sharemarket returns. (VIEW LINK)


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