The Australian dollar retreated to its lowest in over a year on Tuesday as investors quickly returned to worrying about slowing global growth and shied away from riskier trades in stocks and commodity currencies. The Aussie dollar got only fleeting support from a firm 1.4 percent rise in domestic retail sales since they did nothing to change expectations that interest rates here would be cut again, perhaps as soon as October.
In contrast, the US dollar was buoyant near one-year highs against a basket of currencies, which in turn put pressure on short dollar/long commodity positions. "The risk of softer commodity prices, expectations of further domestic rate cuts and the US dollar's bounce are all combining to pull the Aussie lower," said Stephen Roberts, chief economist at Lehman Brothers. "Add to it the unwinding of yen carry trades."
In late trade, the Aussie had eased to $0.8076/78 from $0.8315/17 late here on Monday, having fallen as far as $0.8020, its lowest since August, 2007. It had rallied to above $0.8300 on Monday after the bailout of mortgage giants Fannie Mae and Freddie Mac briefly shored up sentiment for riskier assets and higher-yielding currencies.
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