Australian dollar faces possible 3rd rate cut

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The Australian dollar is down sharply today after quarterly sluggish growth fueled expectations that the reserve bank of Australia may need to slash interest rates again.

The Aussie dollar hit a low of US76.15c in yesterday’s trade after the Australian Bureau of Statistics reported the capex dropped 4.4 % in the first 3 months of the year falling  well short of the 2,2% drop most analysts had expected. The fall was attributed to the Australian economy’s failure to make the transition from the mining boom, which recently came to a crashing end.

"It all looks pretty bleak," JPMorgan economist, Stephen Walters wrote in a note to clients, adding that any "glimmers of hope for an economy still struggling to adjust to plunging commodity prices and sliding mining investment" had been "snuffed out".

Former US Federal Reserve chairman Ben Bernanke, speaking at the world business forum in Sydney noted that that Australia would "have to respond" if the Aussie dollar continues to trade above an acceptable level,.

"If Australia finds it has a strong Australian dollar and it has higher unemployment, then it would have to respond and that would either be by increasing domestic demand or by weakening its own currency," Mr Bernanke said.

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