The Australian dollar (AUD) demonstrated remarkable strength over 2016.
Despite enduring two Reserve Bank (RBA) interest rate cuts (in August and May), a US Federal Reserve rate hike (in December) and a 0.5% fall in Australian GDP over the September quarter, our currency spent most of the year hovering between 70-80 US cents.
Amid a slow-down in mining activity, experts had forecast the AUD to plunge to as low as 60 US cents in 2016, but this clearly did not happen.
The AUD’s stubbornness would have been frustrating for the RBA, which twice cut interest rates over 2016 in the hope of bringing the value of the AUD down to boost Australia’s exports.
But instead, the AUD only fell 0.85% over 2016 (1 January 2016 – 1 January 2017), going from around 73 to 72 US cents. Over January 2017, the AUD has actually increased to sit around 77 US cents at the time of writing.
— 7NEWS Sydney (@7NewsSydney) February 1, 2017
While it’s typical to measure the AUD’s value against the US Dollar, it’s interesting to look at how it performed against the value of other currencies. This can be useful for travellers who want to visit/avoid a country where their money buys more/less of the local currency.
Compared to the AUD’s relatively stable year, some other currencies had big rebounds in value over the past year. This means that Australian travellers to countries with these currencies would now get ‘less bang’ for their Aussie bucks compared to year ago.
5 currencies the AUD fell against over past year
Please note that all currency increases below are calculated from 5 Feburary 2016 to 3 February 2017. Currency depreciation is rounded to nearest percentage.
Russian Ruble – AUD fell 18%
The Russian ruble was the world’s best performing currency in 2016, as it recovered back some of the value it lost in 2015.
This recovery was assisted by the rebound in the price of oil (Russia’s biggest export) and the election of Donald Trump as US president.
Despite this recovery, the AUD is actually 55% stronger against the ruble compared to what it was worth at the start of 2014.
Brazilian Real – AUD fell 15%
The Brazilian real was a close second in the world’s top performing currencies over 2016.
Similar to Russia, Brazil’s economy is in the midst of a recovery after enduring a political crisis and the Zika virus outbreak, among other things.
Since Michel Temer has stepped in as president and Rio de Janeiro hosted the Olympics, Brazil’s stock market has soared along with its currency.
But although the AUD fell 15% in value against the real over the past year, the AUD is still over 10% stronger against the real than it was 2 years ago.
South African Rand – AUD fell 10%
Over 2016, the climbing South African rand reversed around half of the 20% gain the AUD had made against it over 2015.
From a glass-half-full perspective, this means the AUD still buys around 10% more rand than it could at the start of 2015.
The rand strengthened over 2016, as South Africa twice avoided credit rating downgrades to junk status.
Colombian Peso – AUD fell 8%
Colombia’s economy is heavily reliant on its oil exports, so when the oil prices hit an 18-month high in December 2016 (after major oil producing countries agreed to slow down oil production), the Colombian peso also spiked in value.
But as with the ruble, real and rand, the AUD is still worth significantly more Colombian pesos now compared to 2 years ago. In fact, since the start of 2015, the AUD has climbed 13% higher against the Colombian peso.
Icelandic Krona – AUD fell 5%
Over the last five years, the Icelandic krona has steadily increased in value against the AUD. As it stands, it is now over 33% stronger against the AUD than 5 years ago, after it rose a further 5% over the past year.
This rise is unfortunate for Aussie travellers longing to visit this dazzlingly land of fire and ice, as it pushes the dream even further out of their financial reach.
On a positive note, the Icelandic krona has actually weakened around 7% against the AUD so far in 2017.
But as Iceland’s economy continues its remarkable growth, expect the krona to continue its upward trajectory.