THE Aussie dollar has taken another beating, opening nearly 1.5US cents lower this morning after more "carnage'' on overseas markets.
And forecasters say there is no immediate relief in sight for investors, with the dollar expected to drop as low as $US0.8090 in trading today.
At 7am, the Australian dollar was trading at $US0.8169/74, down 1.72 per cent from yesterday's close of $US0.8314/16.
An unexpected rise in US jobless claims and ongoing concerns about the Eurozone debt crisis depressed investor confidence about global economic recovery.
Since 5pm yesterday, the local unit traded between $US0.8360 and $US0.8149, its lowest level since July 2009.
The local currency has depreciated 12.3 per cent since the end of April 30.
For consumers, the drop will push up the prices of imported electrical goods and cars.
The fall in the dollar follows another shocking day of trade on the Australian share market, with the S&P/ASX200 last night closing down 70.6 points, or 1.61 per cent, at 4,316.5 points, while the broader All Ordinaries index fell 71.9 points, or 1.63 per cent, to 4,342.4 points.
Overnight the Dow Jones Industrial Average index closed down 3.60 per cent, its third straight day of losses and its biggest percentage drop in more than a year.
Bank of New Zealand currency strategist, Mike Jones, said high risk assets such as equities, commodities and currencies such as the Australian dollar continued to weaken following more ``carnage'' on financial markets.
"We are seeing worries continue to mount that the European sovereign debt crisis is starting to derail, or at least slow the global economic recovery,'' Mr Jones said from Wellington.
"That has taken a harsh toll on equity markets and commodity prices.
"There has been a clearout on equities and the risk sensitive currencies, with the Aussie at the forefront of that clearout.''
The Australian dollar is considered a high-risk currency as it is linked to the global economic recovery, so signs of weaker economic growth across the world will hinder the domestic unit.
Mr Jones forecast the local dollar would trade between $US0.8090 and $US0.8250 during today's local session.
"The current backdrop of deteriorating risk appetite and widespread pessimism about the global recovery mean the Aussie dollar would be expected to keep falling today,'' he said.
Mr Jones said the Australian dollar would gain its direction today from Asian equity markets' reaction to the very sharp fall in the US and Europe overnight.
Comments:
As learned in Economic class, this article catch my attention and I would like to share with the others. A country's currency falls because the demand of the country's currency drops, causing the supply of this currency to have surplus. In illustration, the supply of the currency increases, shifting to the right in the market of the currency.This pushes down the currency, meaning that each Aussie dollar can only buy less US dollars ( normally measured in US dollars ). The main underlying reason is that an unexpected rise In US jobless claims and ongoing concerns about the European debt crisis depressed the investors' confidence about global economic recovery. As a result, there is a clearout on equities and risk sensitive currency. Aussie dollars are the forefront of the clearout because it depends highly on the global economic situation. Deteriorating risk appetite and widespread pessimism cause expectation that Aussie dollars will continue to fall.
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