25th August 2015: Australian Dollar Plunges.

Overnight the Australian dollar plunged to more than six years lows below 0.7050 as global markets fell in the wake of a breathtaking fall in Chinese stock markets. As concerns grew over asset bubbles in China and fears of a hard landing for the Chinese economy escalated, investors globally threw in the towel and precipitated a massive 1000 point drop in the Dow Jones index when the U.S. markets opened for trading on Monday.

The silver lining is that the Australian dollar is now at its most favourable level for exporters in more than 6 years.  Whilst no one can predict where the Aussie is headed and the major banks are revising their estimates for the currency to trade below 70 cents before the end of the year, it certainly must be the most prudent strategy for exporters to now look at locking in some forward exchange rate cover. Many exporters would have been struggling when the dollar was trading close to $1.10 against the United States dollar with trading conditions improving as the Australian dollar fell below parity and then subsequently to below 90 cents and then below 80 cents.

Currently, exporters can lock in forward cover for six months at levels below 0.7250. Marcus Ungar, Vice President at Compass Global Markets said today, ” It is a simple matter of good cash flow management. If you have forward sales and know that at current exchange rates your business is doing well in terms of margins then why not explore the possibility of locking in rates or other strategies that allow you to take advantage of the very favourable rates? You can effectively lock in your cost of goods at very attractive levels “

Call your FX dealer at Compass Global Markets today to learn more about your options.

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