The Australian dollar has continued its record streak, hitting a new high of $US1.10 this morning as the US dollar continues to weaken.
However, the news will not be welcomed by exporters, who have said they are struggling as the dollar continues to climb. Many have signalled they may no longer be able to trader much longer if the dollar stays high for long.
Moreover, AMP economist Shane Oliver has told Fairfax that while the higher dollar may give some advantages for purchasing goods overseas, the sharemarket will be negatively affected.
“The surging Aussie dollar is becoming a severe dampener on Australian earnings growth and so as long as it keeps surging the Australian sharemarket is likely to remain a laggard compared to US shares,” he said.
With the market awaiting the Reserve Bank’s monthly meeting tomorrow, there was some food for thought this morning, with an inflation survey showing a lessening of inflationary pressures last month as price rises from the summer’s natural disasters receded.
The TD Securities-Melbourne Institute measure of consumer prices showed an annual inflation figure of 3.6%, well above the Reserve Bank’s 2-3% target band, but down from the 3.8% recorded in March.
The index showed consumer prices lifted 0.3% in April, following a 0.6% increase the previous month, with fruit and vegetable prices dropping 12% for the month, erasing gains in March.
And while electronic items recorded falls, buoyed by the strong Australian dollar, there were rises in petrol, health services and tourism services.
The mean measure of underlying increase rose 0.2% to 2.3%, TD-MI said.
Meanwhile, Telstra shares were weaker in morning trade despite a report saying the telco hopes to finish talks with the Government over the National Broadband Network by the end of May.
The telco today also announced a $600 million, five-year plan to bring services to small business in line with those offered to large corporation.
“We’re offering some of the world’s most sophisticated call features and complete integration between fixed and mobile,” Telstra chief David Thodey said. The telco will upgrade its network technology to help businesses switch to digital.
At 12.40 AEST, Telstra shares were 0.69% lower at $2.89, in line with a fall in the benchmark index.
The Australian dollar has also negatively affected manufacturers, according to new data released this morning by the Australian Industry Group.
The AIG-PriceWaterhouseCoopers Australian Performance of Manufacturing Index increased by just 0.5 points during April to 48.4, below the 50-point level separating expansion from contraction.
AIG said in the report much of the decline was recorded in the transport, equipment and textiles sectors. Seven of the 12 sectors recorded in the index registered a decline.
“The uncertainty of how this will evolve is the essence of the pressures on the industry,” AIG chief executive Heather Ridout said.
“Next week’s Federal Budget needs to address this critical uncertainty in what is a key and big employing sector of the national economy.”
PwC head of industrial manufacturing Graeme Billings also said manufacturers continue to hurt as the Australian dollar climbs well above $US1, with some economists believing it may hit $US1.12 sooner than expected.
Despite a positive lead from the United States last week, the Australian sharemarket has opened flat this morning after the dollar hit $US1.10.
The benchmark S&P/ASX200 index was down 35 points or 0.73% to 4788.1 at 12.00 AEST.
AMP shares lost 1.64% to $5.39, while NAB lost 0.26% to $27.01. Westpac dropped 0.93% to $24.61 as ANZ lost 0.78% to $24.04.
Explosives manufacturer Orica has said it expects full-year profit to be ahead of last year’s result, even taking into account damage from the Queensland floods, with the firm delivering a 368% increase in half-year profit.
Orica recorded a result a $263.8 million in the first half, thanks to a recovery in many of the company’s key markets, chief executive Graeme Liebelt said.
“There has been recovery in volumes across some markets. This, coupled with modest improvements in pricing and continued focus on productivity improvements, more than offset adverse impacts from weather conditions and foreign exchange movements,” Liebelt said.
However, Liebelt has added the high Australian dollar is impacting on business, warning even one cent increase has an impact worth millions, according to Reuters.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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