Lower Australian interest rates, a rise in the US dollar and a shrinking euro have combined to bring the Australian dollar below parity. Photo: Louie Douvis
LOWER Australian interest rates combined with a rise in the US dollar as the euro sinks have dragged the Australian dollar below parity.
The currency finished yesterday's session at US98.78¢, down sharply from Wednesday's close of $US1.0016 and down more than US3¢ in the past week.
Mineral commodity prices have been savaged on heightened fears that contagion from Europe's debt crisis will choke global economic growth.
Copper, the bellwether metal for industrial metals demand expectations and the most important metal for the resource market leaders BHP Billiton and Rio Tinto, tumbled 5.1 per cent on Wednesday night to $US3.33 a pound.
Gold fell below $US1600 an ounce for the first time since October, finishing Australian trading at $US1568.17 an ounce - down $US71.66 and its lowest in five months. Silver was its cheapest since February.
Aluminium, which has been languishing because of fears of oversupply at a time of global economic uncertainty, fell 1.9 per cent to US89.6¢ a pound. The light-weight metal is now at a level at which much of the global industry would be making losses.
Its fall also comes as Rio Tinto considers an initial public offering of its Australian smelters, or a trade sale.
On Wednesday night, Standard & Poor's GSCI index of 24 raw materials dropped 4.1 per cent.
''Commodity markets are fragile beasties, you don't need big shifts in either demand or supply to move them a lot,'' said Chris Richardson, director of Deloitte Access Economics.
Gold has been hit particularly hard, with some market watchers expecting it to drop as low as $US1400 an ounce.
''There is a feeling that there is nowhere to hide at the moment,'' said CMC Markets sales trader Ben Taylor.
''The once safe haven of gold has been hijacked in US dollar strength. US bonds give you little to no real return, and equity markets are quickly losing their appeal for super accounts.''
The appreciating US dollar has also weighed on some commodity prices.
Lead fell 4.1 per cent to US91.4¢ a pound, nickel tumbled 4.9 per cent to $US8.08 a pound, and zinc gave up 3.1 per cent in overseas markets to finish at US85¢ a pound.
Oil fared no better. An increase in OPEC's production ceiling for member countries for the first time in three years, along with the economic growth concerns, rattled markets. Oil in the US market fell 4.4 per cent to $US95.78 a barrel.
With Gareth Hutchens
