Fresh indications of a US rate rise, uncertainty about the Chinese economy and a second rate cut by resource-rich Canada sends the Aussie downwards

This article is more than 5 years old

This article is more than 5 years old

The Australian dollar has fallen to a new six-year low as the US greenback strengthened and continued uncertainty about the Chinese economy darkened the outlook for resource-led economies.

The currency hit a daily low of 73.50 US cents on Thursday afternoon before recovering to US73.77, a steep fall from US74.72c 24 hours earlier.

The Australian dollar came under pressure when upbeat Chinese growth data failed to prevent a slide on China’s equity markets, renewing fears about the state of the world’s second biggest economy and Australia’s biggest export market.

CommSec chief economist Craig James said the Aussie could fall even further.



“We’re now looking at US72c by the end of the year and US70c by March and June of next year,” he said.



The US dollar picked up overnight after the chair of the US Federal Reserve, Janet Yellen, reiterated her forecast of an increase in interest rates by the end of 2015.

“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate,” she told Congress.

She said the Fed was watching the situation in Greece as well as the stock market turmoil in China.

The goings-on in Greece and China “are not new”, Yellen said on Wednesday, indicating that the situation abroad had yet to force the Federal Reserve to reconsider its plan to raise interest rates later this year.

The Bank of Canada cut its benchmark rate, for the second time this year, by a quarter of a percentage point to 0.5%. In response, the Canadian dollar plunged to a post-recession low of 77.29 US cents. The bank said the economy had contracted in the first half of 2015.

“The global economy remains fragile and is being dragged down by forces beyond our borders such as global oil prices, the European debt crisis and China’s economic slowdown,” a spokesman for the prime minister, Stephen Harper, said.

The Canadian economy, which relies heavily on resource exports, is often compared to Australia’s and the prospect of more monetary stimulus from Ottawa heaped pressure on the Australian dollar. The New Zealand dollar also suffered.

The Australian stock market had a better day, however, closing up for the third day running with a collective sigh of relief from investors after the Greek parliament approved that nation’s bail-out conditions. The benchmark S&P/ASX200 index was up 0.59% at 5669.6 points.

“We’ve emerged from the dark clouds of Greece and China,” said IG markets strategist Evan Lucas.

Despite a jump in oil prices on Thursday morning after data showed a fall in US inventories, US and Brent prices are down more than 17% and 13% respectively from their June peaks as oversupply of around 2.5m barrels a day remains in place.

The prospect of a gradual return of Iranian exports from 2016 following a nuclear deal between Tehran and six global powers has also put pressure on prices.