Aussie dollar at five-year low
The Australian dollar opened 3.1 per cent weaker on Monday after fears of a global recession pushed the currency to a five-year low at the weekend.
At 0700 AEDT, the Australian dollar was trading at $US0.6195/97, down almost two US cents from Friday’s close of $US0.6388/94.
During the weekend session, the local currency moved between $US0.6510 and a low of $US0.6060, the Australian dollar’s weakest point since April 15, 2003 when the unit hit 0.6030.
Within this 6.9 per cent offshore session range, the Australian dollar slumped to the lowest level since the early days of the Iraq war.
Worldwide equity market slides and falling commodity prices contributed to the Australian dollar’s dramatic drop on Friday night.
Against the low-yielding Japanese yen, the Australian dollar fell to 55.10 yen, which was even weaker than its low point in October 2000.
CommSec chief economist Craig James said fears of a global recession hit the commodities-driven Australian dollar as other major currencies also faltered against the US dollar.
“The general theme was fear of global recession,” he said on Monday morning.
“If you’re heading towards a significant downturn and slipping economic growth, then you’re likely to use less oil and base metals and as a result there would be less demand for Australian dollars and less demand for the commodities Australia produces.
“People are fearful of countries with high debt and current account deficits … there’s a lot against the Aussie.
“There’s not a lot pushing the currency higher.”
The Australian dollar’s low point on Friday night coincided with sharp falls on US equity markets, with the key Dow Jones Industrial Average shedding 3.59 per cent and the broader Standard and Poor’s 500 losing 3.45 per cent.
Asian and European share markets also lost ground.
Key commodities tumbled during the New York session, with copper losing 6.54 per cent.
Mr James said market sentiment rather than a particular item of news battered risk appetite for high-yielding currencies on Friday night.
He said that in the absence of major domestic economic data today, the Australian dollar was likely to trade between $US0.6150 and 0.6250.
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