TA:Australian dollar loses 5pc against US greenback in 24 hours
THE Australian dollar plummeted to its lowest level in months today as Europe's widening financial distress panicked investors, sending stocks, commodities and commodity-linked currencies lower.
At 4pm AEST today, the Australian dollar was at $US0.9751, down from $US1.0017 late yesterday. Against the Japanese yen, it was at Y74.41, down from Y76.86.
In the midst of a US sell-off overnight that saw the Dow Jones Industrial Average close down nearly 400 points, the US dollar hit an eight-month high against the euro with the previously bulletproof Australian dollar down 5 per cent against the US dollar in just 24 hours. Even with some stability in Asian action, the damage had already been done as global economic jitters trumped markets and heightened volatility led to growing concern about the next move in the Australian dollar.
"It needs an end to the financial market volatility and that can only come from the euro zone, which is a terrible position to be in. We have seen very little evidence of proactive moves from Europe," said Rob Ryan, a foreign exchange analyst with BNP Paribas in Singapore.
The decline in the domestic currency came despite monetary policy makers from the world's 20 largest economies converging on Washington for an annual meeting of the International Monetary Fund and the World Bank. The meeting has so far been overshadowed by the worldwide financial turbulence, though a statement from the group vowing action to help economies globally helped the Australian dollar pare some of its decline.
At one point in the session, the currency had traded as low as $US0.9696.
In the fixed income market, traders bought Australian government bonds aggressively on both ends of the curve. That buying was further helped by a decision by Standard & Poor's to reaffirm the Australia federal government's AAA long-term debt rating.
"This will add to the strong underlying demand for commonwealth bonds and that is a real positive for Australia," said Tony Morriss, senior interest rate strategist at ANZ.
Still, the buying heightened a recent trend of fixed-income investors differentiating more between Australia and some of its states, a move that was further extended today by S&P cutting its outlook on South Australia at the same time as reaffirming Australia's federal rating.
