The Australian dollar ended the week below parity, losing more than one US cent, amid fears over the consequences of a higher-than-expected Chinese inflation rate and debt in Europe.
At 1700 AEDT on Friday, the Australian dollar was trading at 99.11 US cents, down from Thursday’s close of 100.44 cents, and sank further to trade recently at 98.6 US cents. For the week, the dollar had its biggest decline against the dollar since the middle of August.
It was also buying 72.75 euro cents after nearing a record high of 73.3 euro cents. The Aussie dollar was also worth 81.5 yen and 61.7 pence in recent trading.
Since 0700 AEDT today, the local unit traded between 99.03 US cents and 100.20 US cents.
On Thursday, it was announced Chinese inflation jumped to 4.4 per cent, compared with 3.6 per cent in September.
It was the fastest pace since September 2008 and higher than several analyst predictions.
Rochford Capital director of market risk advisory Derek Mumford said the continuing fall in the Australian dollar was largely due to the Chinese inflation problems.
‘‘Obviously there’s inflation pressure there and increasing interest rates look likely to continue,’’ he said.
‘‘The thought at the back of people’s minds is there could be a hard landing there, but there’s no sign of it yet.
‘‘Also I think there’s been profit-taking in US dollars.’’
Mr Mumford expects the weak equity market in Australia and much of the Asian region to extend to Europe and the US markets later today.
‘‘That will put pressure on the Aussie and I wouldn’t be surprised if we see it below 99 US cents at some stage tonight before it stabilises out,’’ he said.
‘‘Equities markets are getting a bit nervous about what’s happening in China, with the inflation higher than what the market has been expecting.
‘‘I think the steps they’re going to take to keep it under control is going to have some unexpected consequences.
‘‘If we see some follow through selling on equities that will obviously put some pressure on the Aussie dollar.
Mr Mumford expects the Australian dollar to trade in a range of around 98.00 US cents and the 101.50 US-cent mark in the next three or four weeks.
AAP
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