Aussie dollar dips below 70 US cents, twice

The Australian dollar dipped to a six year low as worries about the local and Chinese economies weigh on the currency.


At 1700 AEST on Wednesday, the local unit was trading at 70.24 US cents, down from 71.08 cents on Tuesday.

The currency twice dipped below 70 US cents on Wednesday, the first time is has done so since 2009.

The first was because of weak Chinese manufacturing data and the second time was after local data showed the economy in the June quarter slowed to its slowest pace in two years.

The Australian dollar also hit two week lows against the Japanese yen and the euro.

Gross domestic product (GDP) rose 0.2 per cent in the second quarter for an annual rate of just two per cent, as falling commodity prices dampened economic growth.

ThinkForex senior markets analyst Matt Simpson said the local economic growth figures made a major impact on financial markets on Wednesday.

“When GDP came in below expectations today the Australian dollar wasted no time selling off across the board,” he said.

Mr Simpson said traders were looking for a clear sign from the GDP figures for clues on whether the Reserve Bank will cut the cash rate again.

“With growth below trend at two per cent, whilst this does not immediately feed into a dovish RBA, it is yet further evidence that the Australian economy is a long way from getting back onto pre-GFC track,” he said.

However Mr Simpson believes that the Australian dollar will not make a clear break below 70 US cents for the time being.

At 1700 AEST, the Australian dollar was at 84.29 Japanese yen, down from Tuesday’s close of 85.68 yen, and at 62.24 euro cents, down from 63.01 euro cents.

Meanwhile, the Australian bond market is weaker despite the local equities market spending most of the day in negative territory because of the weak GDP figures.

At 1630 AEST on Wednesday, the September 2015 10-year bond futures contract was trading at 97.280 (implying a yield of 2.720 per cent), down from 97.330 (2.670 per cent) on Tuesday.

The September 2015 three-year bond futures contract was at 98.200 (1.800 per cent), down from 98.230 (1.770 per cent).