Australian Dollar Takes about a 2-cent Drop Overnight
The Australian dollar has been decreasing in its value as of late. Just recently, the Australian dollar has gone down at US 1.58c. In relation, Europe and the US have been having issues with their stocks.
Due to the overnight 2-cent decline in stock exchanges, the European Central Bank (ECB) has offered their assistance in handling the debt crisis that has been plaguing the region. It has also been noted that other countries like Italy could be affected by this debt crisis.
According to Angela Merkel, the German Chancellor, regaining market confidence cannot be accomplished just by having a weekend meeting with the heads of states in EU. However, a strategist reminds that it is against the EU rules to use European Financial Stability Funds just to provide guarantees for the bonds.
Fears arising from the decline of stock values are not uncommon. Mr. Ronald Randall, the aforementioned strategist, notes that, “Any escalation of fear is going to encourage those long risks to take it off the table and I expect that to continue and the Aussie to trade a little softer.”
Due to the decline in the Australian dollar, people have been waiting for news regarding the EU heads’ decision about the situation, as stated by Will Richardson, the Macquarie Bank director of FX. In relation, Martin Parkinson, Australian Treasury secretary, states that Australia must keep a close watch over any decision from the EU.
Australia has been able to bounce back from the credit crisis experienced 2-3 years ago. However, Mr. Parkinson, who also happens to be a board member of the central bank, says that “The bigger risk to the Australian economy would be if Europe failed to deliver a comprehensive response to the sovereign debt crisis and found itself in a situation where it was dragging the rest of the world into a second global recession.”
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