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Aussie leads commodity peers lower as oil, Chinese stocks slide
[EDINBURGH] Australia's dollar weakened against its major peers as metal and oil prices fell, adding to concern the commodities slump will hurt the economy.
The Aussie led declines among currencies of nations that export raw materials to China, where stocks tumbled the most in three weeks. Goldman Sachs Group Inc predicted that iron ore, Australia's biggest export earner, will drop about 30 per cent over the next 18 months.
The Australian currency slid against all of its 16 major peers except Norway's krone as the Reserve Bank of Australia said that its accommodative monetary policy remains appropriate.
Australia's dollar dropped 0.4 per cent to 73.44 US cents as of 7.01 am New York time. It touched a six-year low of 72.16 cents on Aug 12, a day after China - the top destination for Australia's exports - devalued the yuan.
"There's still some downside, which we expect, not least because of what's going on in China and a continued terms-of- trade deterioration," said Gavin Friend, a strategist at National Australia Bank Ltd in London.
Mr Friend said he sees the Aussie sliding to 70 cents by year- end and 68 in the first quarter of 2016.
Canada's dollar and the krone also fell as West Texas Intermediate crude dropped to the lowest on a closing-price basis since 2009. Oil slipped below US$50 a barrel last month amid speculation a global supply glut will be prolonged.
Australia Transition The Australian dollar's slide is assisting a transition away from mining investment, the central bank said Tuesday in minutes of its August meeting. RBA Governor Glenn Stevens and his board have held borrowing costs for the past three months, leaving the main rate at 2 per cent.
Malaysia's ringgit, which has also been battered by a political scandal, slipped to levels last seen during the Asian financial crisis in 1998. It's the worst-performing Asian currency the past month, sliding 7 per cent versus its US counterpart. The next-worst performer is Taiwan's dollar with a 4.2 per cent decline.
The dollar strengthened 0.2 per cent to US$1.1060 per euro and was little changed at 124.30 yen.
"One of the things that's going on is this constant drip, drip of a higher dollar versus emerging market and commodity" currencies, said NAB's Mr Friend.