The recent rise of the Australian dollar has been met with a healthy dose of caution and muffled applause from distributors.
Since March, the dollar has broken through the $US0.70 barrier and held its gains after six months of stagnation around the $US0.60-70 mark. The fluctuations followed a 30 per cent fall from a 25-year high $US0.98 in mid-July.
In April alone, the Aussie is up around 3.5 per cent against the US dollar and has also risen against the Japanese Yen, climbing above 71 Yen.
“Our forecast has been $US0.77 by the end this year and that has been in place since December last year. We see no reason to change that as that is where we are heading,” CommSec chief currency strategist, Richard Grace, said. “We are getting probably a little more rapid rise in the currency than what we anticipated, but it has been supported by a pick up in global equity markets, which are up 30 per cent from their lows, and a pick up in base metal markets – copper is up more than 60 per cent from its lows. We are also coming to the conclusion of the interest rate cutting cycle from a number of the countries around the world, if we are not already there.”
For the IT market, the recent rebound should create cheaper product prices, Express Data managing director, Ross Cochrane, said. As a result, the distributor is taking new pricing action this week.
“We’ll pass on the improved buying power that we have,” he said. “Almost all technology comes from the US, so prices will move down and have been moving down already.”
But Cochrane cautioned that while the currency is on an upswing now, it would continue to be hard to predict. CommSec’s Grace predicted a short-term correction to the sub-70s for a brief period, before continuing its rise.
Dicker Data sales manager, Chris Price, said some vendors would retain price levels to lift margins back to pre-August levels.
“Other vendors will be looking to get some more money back in, depending on whether they’re looking for market share or margin. Just earning your revenue doesn’t mean you guarantee jobs,” he said. “Also, it’s at $US0.71 right now, but would you bet your house on it not being $US0.61 again next week? Before August, people had more confidence in the dollar, but right now, I wouldn’t reset pricing.” CFO of fellow distributor Westcon Group,
David Corcoran, said the exchange rate presented challenges for vendors and distributors regardless of whether it fluctuated upwards or downwards.