SYDNEY (AFP) – The Australian dollar briefly hit a 10-year low against the greenback yesterday, as twitchy investors ditched more volatile assets and traders saw evidence of a computer-aided “flash crash”.
The Australian currency sank to below 68 US cents in morning trading – the lowest level since 2009 – before recovering slightly.
Analysts pointed to growing concern about the Chinese economy, after worse-than-expected Chinese manufacturing data.
That concern sent mineral prices lower and with them the resource-sensitive Australian dollar.
“Aluminium and copper were both off by more than two per cent” said analysts at NAB Markets Research, which also saw the hand of algorithms – automated computer trades – as the reason for the severity of the fall.
At one point the Aussie dollar was off four per cent against its United States (US) counterpart.
“The fact that over half the move down… has since been retraced is testimony to today’s moves being first and foremost a ‘liquidity event’,” said NAB. But the wild swing will do little to ease concerns that import and export-dependent Australia could be in for rougher times ahead.
The weaker Australian dollar makes imports more expensive.
“We are not as yet prepared to suggest that AUD/USD is now establishing a lower (eg 0.65-0.70) trading range,” said NAB, while warning that a weaker Aussie dollar could continue.