The Australian dollar lost ground on Monday, retreating from last week's 24-year peaks against the US dollar, after investors dumped higher-yielding currencies and risk appetite took a beating. Asian stocks slumped on growing fears about a US recession and more writedowns in the financial sector.
That led investors to unwind leveraged carry trades, where they borrow in the yen to buy high-yielding Australian or New Zealand dollars. The Aussie fell to its lowest in a month against the yen as investors sought safety in low-yielding currencies. The Aussie dived to 95.60 yen, its lowest since February 8, from 99.19/29 yen late on Friday.
"Continued woes in the financial sector are a reminder that risk aversion is set to remain a drag on the Aussie for some time to come," said Tony Morriss, senior currency analyst at ANZ. "The Aussie should weaken further against the Japanese and Swiss franc."
The Aussie was at $0.9341/45 against the US dollar, down 1.3 percent from $0.9459/64 on Friday and well below a 24-year high of $0.9498 struck on February 28. It fell to $0.9276 during the session, but recouped some of its losses on robust economic data and record high gold prices.
A private sector survey showed annual inflation in Australia accelerated to a six-year high in February, keeping alive chances of more interest rate rises in coming months. The TD Securities-Melbourne Institute monthly inflation gauge rose 0.3 percent in February. Annual inflation rose to 4.0 percent, way above the top of the Reserve Bank of Australia's (RBA) 2 to 3 percent target band.