A US default could see the Aussie dollar soaring
Tuesday, 15 October 2013
A senior academic from the Australian School of Business is available for comment on the rise of the Australian dollar and the connection with a possible US default.
James Morley, a Professor of
Economics at UNSW's Australian School of Business, said "a US default would almost certainly lead to a large drop in the US dollar relative to other currencies - and that would effectively see the Australian dollar soaring against the US currency."
US politicians have been in intense meetings over the past few days in the hopes of sealing a deal before the US Treasury exhausts its borrowing authority on Thursday.
He said "an exchange rate back above 97 US cents for the Australian dollar is in theory possible - Indeed, if there is a default, it is quite easy to imagine that the Aussie and greenback would hit parity once again."
However James Morley said that despite the looming debt ceiling crisis in the United States, a default is almost inconceivable. "I don't think a default will occur. The consequences are too dire."
There are now report of a tentative US Senate fiscal deal, which would increase the debt limit through to February 15.
James Morley has been watching the markets, and is a member of the RBA Shadow board, which meets each Thursday before the decision by Reserve Bank of Australia board. He said "we were in a situation where financial market expectations about Australian interest rates were the biggest driver of the Australian dollar, which had fallen about 20% off its peak last year. Now however US monetary policy is driving its rise again."
For further comment call James Morley on 02 9385 3366, 0406 842 550, or
Media contact: Julian Lorkin: 02 9385 9887