The Australian dollar hit seven-week lows against the yen and was bogged down against the US currency on Wednesday, with investors shunning risky high-yield assets amid fears of a recession in the United States. Regional stock markets took their lead from Wall Street where shares tumbled on the back of weak US retail sales data and news of a record quarterly loss for Citigroup's.
Heavy stock market losses caused investors to flee to the relative safety of low-yielding currencies and government bonds. The Aussie dropped to 93.51 yen on Wednesday, its lowest in since November 27, as investors exited risky carry trades where they borrow in the cheap yen to invest in higher-yielding currencies.
The Aussie was at $0.8843/46 against the US dollar, down from $0.9000/03 late here on Tuesday and having lost nearly 2 percent from a two-month high of $0.9020 struck in offshore trade.
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