SYDNEY: The Australian dollar dropped to a five-and-a-half year low against the US dollar this morning as the European single currency remained to fall after the European Central Bank’s quantitative easing program declared previous week, and as traders absorbed the implications of an anti-austerity party coming to power in Greece.
Australian currency trading was very light owing to the Australia Day public holiday.
At 1030 AEDT, the Australian dollar was trading around $US0.78.76 after falling as $US0.7866, its lowest point since July 2009.
The exchange rate fell 1.4 per cent on Friday, matching a fall in the euro against the US dollar, which rose to an 11-year high against its trade weighted index.
With commodity prices remaining weak, interest rate cuts in Australia expected in coming months, and the fall in the euro exacerbating US dollar strength against most currencies, the Aussie fell decisively below major psychological support at $0.8000 on Friday.
The price of iron ore – Australia’s largest commodity export – slipped 0.6 per cent to a fresh five-year low of $US$66.42 on Friday, and West Texas crude oil futures fell 1.8 per cent at $US44.78 early Monday, near a six-year low of $US44.20 struck earlier this month.
Adding to the sense of political uncertainty in Greece – and the possibility that the debt-strapped nation could eventually be forced out of the Eurozone – the leader of the anti-austerity Syriza party, Alexis Tsipras, said Greece will no longer bow down to international creditors.
Analysts expressed some concern that Syriza could gain enough votes for an outright victory.
“The first exit polls from Greece’s election came through early this morning, and suggested that anti-euro Syriza may gain an outright majority,” said Bank of New Zealand currency strategist Raiko Shareef. “Those initial polls weighed on EUR at the open today.”
With the Greek Interior Ministry projecting that Syriza will win 150 seats out of 300, Mr. Shareef said Syriza was likely to reach for a coalition partner, likely to be To Potami, whose leader has said his party will not support any policy that threatens EU membership.
“Either way, we can’t see much reason to be positive on EUR today. The result lends itself to Syriza leader Tsipiras talking tough on/at debt negotiations with the troika.”
