SUNBIZ

A Look At The Fijian Dollar And Its Key Driver – The Australia Dollar

This week we look at the Fijian dollar (FJD) and its key driver – the Australian dollar (AUD). The FJD is determined by the baskets net movement. The basket comprises
04 Apr 2015 08:45
A Look At The Fijian Dollar And Its Key Driver – The Australia Dollar

This week we look at the Fijian dollar (FJD) and its key driver – the Australian dollar (AUD).

The FJD is determined by the baskets net movement. The basket comprises of five currencies namely the USD, AUD, NZD, JPY and EUR

However weightings are speculated and are only known to the Reserve Bank of Fiji.

However, the AUD continues to be the key driver of the FJD or otherwise known as FJD/USD pair.

Having said that, traders have speculated the AUD to continue to fall and could reach AUD/USD 0.7300 (73 cents which is the AUD in terms of USD).

Thus one could expect the FJD (FJD in terms of USD) to fall lower if expectations are correct.

Meaning a weaker FJD and a potential higher costs for goods and services priced in USD, namely Oil and Gold.

However this could be favourable on the flip side as our exports in terms of USD will be favourable in getting more FJD.

Also it makes our FJD exports much cheaper and more competitive, thus could increase into the Pacific region and globally for example water and biscuits .

The AUD and FJD falls negates any benefits between the two currencies but places goods and services for consumers in Fiji and Australia indifferent.

Thus a great boost for flights coming in from the Gold Coast as it provides choices. Not to mention other goods and services of a consumer choosing between universities in Fiji and Australia or vice versa.

Forecasts for the AUD and FJD remain intact for further falls with the FJD to 0.4700 cents as she takes her bearings from the AUD via the FJD basket of currencies.

RBA Interest Rate Announcement

RBA Interest Rate Decision is announced by the Reserve Bank of Australia.

If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD.

Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish. This interest rate announcement is crucial for the FJD.

As at the current 2.25 per cent cash rate for Australia is expected to be cut by a further 25 basis points.

However, anything more than 25 basis points could place the AUD exchange rate lower to 75 cents and pressuring the FJD exchange rate lower to 45 cents.

Surveys conducted finds most traders and economists expecting a cut, which makes this interesting as market was wrong last month.

As the RBA left rates unchanged and adopted a wait and see approach. This Tuesday markets are pricing in a 70% chance of a rate cut.

Therefore, Australian borrowers could receive a life line in a reduction of interest rates on their mortgages or debts.

Thus providing relief to those that lost jobs in mining and other sectors, as the RBA tries to stimulate the economy.

– This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at HFC Bank, Peter Fuata.

 



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