Invest
Currency volatility to continue into 2020
With global markets set for a bumpy ride into 2020, the only certainty is uncertainty for the Australian dollar, according to a consulting giant.
Currency volatility to continue into 2020
With global markets set for a bumpy ride into 2020, the only certainty is uncertainty for the Australian dollar, according to a consulting giant.

Australia Matters, a new publication from PwC, has commented that the advent of a new decade “looks set to be a testing time for the country”.
“Market confidence is down, trust is wavering, growth is slow, productivity is stalling and geopolitical uncertainty is taking its toll,” it said.
With the report considering currency volatility to be “a sure bet”, the consultancy flagged that it’s the first time in recent memory that local interest rates are lower than US interest rates – and could go lower still.
The ongoing US and China trade war also presents other material risks that could trigger a currency shock for the Aussie dollar, it was outlined.

Global markets are also predicted to operate “markedly differently in 2020, adding to the general sense of instability”.
The report read that: “While currency fluctuations can be difficult to predict in any detail, the International Monetary Fund (IMF) World Trade Uncertainty Index (which remained largely stable over the past 20 years) recently spiked – from 5.11 in 2018 quarter one to 99.67 2019 quarter three, up 1,852 per cent – reflecting trade tensions between the US and China.”
While the Australian dollar is shaped by many factors, PwC said “its value is ultimately determined by the players within global currency markets”.
“As such, current uncertainty in the economies of our trading partners, coupled with fluctuations in commodity pricing, and an easing monetary policy, are linchpins in the intermediate-term exchange rate volatility we face.”
What does this mean for Australians and Australian companies?
According to PwC, a falling Australian dollar will typically increase the costs of imports and dramatically increase a company’s cost of capital expenditure.
It can make overseas investments more expensive, and increase the cost of servicing foreign currency debts.
It did counter that “of course, Australian exporters will benefit from enhanced competitiveness created by a lower Aussie dollar”.
On the other hand, when the Australian dollar does rise, exporters are less competitive.
This has the effect of pushing down dividends and can decrease a business’ market value.
At the same time, the cost of foreign inputs would also normally decrease, “giving importers a competitive advantage over domestic businesses”.
About the author

About the author


Investment insights
Global investment giant tips market resilience and rate cuts to continue in 2025
State Street Global Advisors has predicted ongoing interest rate cuts and economic resilience for 2025, with its forecast of a US soft landing expected to materialise. Read more

Investment insights
UK pension funds and insurers plan significant investments in renewable energy
A new survey by AlphaReal reveals that UK pension funds and insurers are looking to increase their investments across a range of renewable energy technologies over the next five years. Read more

Investment insights
Morgan Stanley executive touts benefits of long-term equity investing
Investing in high-quality companies with sustainable returns can lead to strong long-term performance, according to a senior Morgan Stanley executive. Read more

Investment insights
Diversification key to managing political risks in global markets, says deVere CEO
Political uncertainties in Europe, the UK, and the US are driving market dynamics, making diversification crucial for investors, according to Nigel Green, CEO of deVere Group. Read more

Investment insights
Diversify AI investments beyond Nvidia for long-term wealth, says deVere Group CEO
Investors should look beyond AI giants like Nvidia and diversify their investments across the wider AI ecosystem to build long-term wealth, according to Nigel Green, CEO of financial advisory and ...Read more

Investment insights
Disappointment over Apple's AI plans and political uncertainty in France weigh on markets
Investors were left unimpressed by Apple's revelations about its artificial intelligence (AI) plans at the company's Worldwide Developer Conference yesterday. Despite details about a partnership with ...Read more

Investment insights
The future of investment: Trends shaping Australia in 2024
As we look towards 2024, the Australian investment landscape is poised to undergo significant transformations driven by technological advancements, economic shifts, and evolving consumer behaviorsRead more

Investment insights
Market rally faces next test as Nvidia earnings loom amid inflation debate
Equity markets around the world celebrated last week after softer-than-expected US inflation data fueled hopes of interest rate cuts, but questions remain over whether the rally can be sustained as ...Read more

Investment insights
Global investment giant tips market resilience and rate cuts to continue in 2025
State Street Global Advisors has predicted ongoing interest rate cuts and economic resilience for 2025, with its forecast of a US soft landing expected to materialise. Read more

Investment insights
UK pension funds and insurers plan significant investments in renewable energy
A new survey by AlphaReal reveals that UK pension funds and insurers are looking to increase their investments across a range of renewable energy technologies over the next five years. Read more

Investment insights
Morgan Stanley executive touts benefits of long-term equity investing
Investing in high-quality companies with sustainable returns can lead to strong long-term performance, according to a senior Morgan Stanley executive. Read more

Investment insights
Diversification key to managing political risks in global markets, says deVere CEO
Political uncertainties in Europe, the UK, and the US are driving market dynamics, making diversification crucial for investors, according to Nigel Green, CEO of deVere Group. Read more

Investment insights
Diversify AI investments beyond Nvidia for long-term wealth, says deVere Group CEO
Investors should look beyond AI giants like Nvidia and diversify their investments across the wider AI ecosystem to build long-term wealth, according to Nigel Green, CEO of financial advisory and ...Read more

Investment insights
Disappointment over Apple's AI plans and political uncertainty in France weigh on markets
Investors were left unimpressed by Apple's revelations about its artificial intelligence (AI) plans at the company's Worldwide Developer Conference yesterday. Despite details about a partnership with ...Read more

Investment insights
The future of investment: Trends shaping Australia in 2024
As we look towards 2024, the Australian investment landscape is poised to undergo significant transformations driven by technological advancements, economic shifts, and evolving consumer behaviorsRead more

Investment insights
Market rally faces next test as Nvidia earnings loom amid inflation debate
Equity markets around the world celebrated last week after softer-than-expected US inflation data fueled hopes of interest rate cuts, but questions remain over whether the rally can be sustained as ...Read more