The Australian dollar seesawed on Monday, retreating as much as 1.4 percent before recovering some composure as regional stock markets held strong gains. Speculation Japanese securities houses and investment banks were selling the Aussie might have contributed to its decline to $0.7892 in the morning session, traders said.
Still, it held above a 10-month low of $0.7670 touched in London trade on Friday before the Federal Reserve later cut its discount rate to banks by a half a point on fears the squeeze in credit markets could hurt growth in the world's biggest economy.
Westpac chief currency strategist Robert Rennie said the Aussie dollar had been marked excessively lower and it was probably time to tentatively buy it against some other currencies. "It has been hurt above and beyond what might have been expected, particularly on crosses such as Aussie/Canadian and Aussie/euro et cetera," said Rennie. "It probably makes sense to dip the toe into some of those crosses."
The drubbing suffered by the Aussie in offshore trade on Friday was the worst in at least a decade and harked back to wrenching and erratic behaviour of the mid to late 1980s, said Peter Pontikis, treasury strategist at Suncorp.
The Aussie dollar was quoted at $0.7957/60, compared with $0.7810/15 here late on Friday, according to Reuters data. Its session high was $0.8001, still about 10 percent below its 18-year peak of $0.8871 on July 25.
Against the Japanese currency, the Aussie was quoted at 91.12/22 yen, up from 87.81/91 here late on Friday, but still about 16 percent below its July 20, 16-year peak of 107.72 yen. "The Australian dollar looks likely to remain hostage to changes in global risk appetite," said Tony Morriss, senior currency strategist at ANZ Investment Bank.
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