The Australian dollar fell towards recent seven-month lows against a buoyant US currency on Monday as worries about a slowing global economy and its impact on commodities continued to worry investors. Oil extended losses on Monday, with gold and metal prices also declining. CRB commodities index finished 2.7 percent lower on Friday, paring most gains made last week.
Australia is a big exporter of natural resources and the Aussie has been sold off aggressively in recent weeks as investors unwound the once highly popular short US dollar-long commodities trade.
The unwinding of those trades has driven the US dollar to multi-month highs against most major currencies, including the Aussie. "The strength of the US dollar remains the dominant theme in forex markets," said Joseph Capurso, currency strategist at Commonwealth Bank. "But if domestic data later this week comes in better than market expectations, as we are forecasting, we could see the Aussie edge up."
The Aussie dollar was at $0.8640/45 against the US dollar, down 1.7 percent from $0.8788/91 late here on Friday and not far from a seven-month low of $0.8590 struck earlier this month. It fell as low as $0.8615 during the session.