The Australian dollar slid to three-week lows against a broadly firmer greenback today, as worries about Greece's debt crisis prompted investors to flee riskier assets.
The flight-to-safety saw Australian debt futures jump to their highest since October last year, taking them to levels held before the Reserve Bank of Australia's (RBA) last rate rise in November.
Indeed, interbank futures surged to heights that imply investors are wagering there is a risk the central bank might have to cut rates in coming months given the global gloom.
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That was a bold call given that just yesterday RBA governor Glenn Stevens warned rates would likely have to rise at some point to contain inflationary pressures from a trade and mining boom.
"I think it's madness. We're of the view that while it could keep the RBA on the sidelines for longer, for them to actually turn around and cut, you'd need a much more substantial shock to the global growth picture than this," said Su-Lin Ong, senior economist at RBC Capital Markets.
The net result was a skid in the Australian dollar to $US1.0520, down about 0.5 per cent on the day, extending Wednesday's 1.2 per cent slide. Support is seen at $US1.0511, the 78.6 per cent retracement of the May 25 to June 3 rise.
A break below that would pave the way to the May 25 trough around $US1.0439. The Aussie is now well off Wednesday's session high above $US1.07 reached just after an upbeat speech from RBA Governor Glenn Stevens.
Three-year bond futures jumped 0.180 points to 95.310, the biggest daily rise since late 2009. The 10-year contract climbed 0.140 points to 94.915.
December interbank futures were quoted up a huge 0.170 points to imply a rate of 4.69 percent, compared to the present cash rate of 4.75 percent. However, traders cautioned the move had been amplified by a lack of liquidity and these levels might not last long.
The Aussie fared better against other currencies, particularly on a sharply weaker euro. The single currency was last at $1.3407, having dropped to a two-week low around $1.3367.
Against the kiwi, the Aussie reached a fresh one-week high at $NZ1.3168, before erasing most of the day's gains to last stand at $NZ1.3104.
The common currency caved in Asia after a Dutch newspaper reported that Nout Wellink, a member of the European Central Bank's governing council, said the European bailout fund should be doubled to 1.5 trillion euros.
