At noon (AEDT) on Friday, the currency was trading at 71.17 US cents, down from 71.67 cents on Thursday.
Early on Friday morning, it fell as low as 70.97 US cents, its weakest level since November 18.
On Thursday, the Australian dollar mostly held steady despite the US Federal Reserve raising its interest rate for the first time in almost a decade.
The subdued initial reaction was put down to the fact that the rate hike was widely anticipated and that the Fed said future rises would be gradual.
However, OANDA Australia and Asia Pacific senior trader Stephen Innes said market sentiment turned sour overnight with the Australian dollar was badly hit.
“If we compound the ongoing slide in commodities, we could see a further drop on the Aussie heading into the weeks end,” he said.
“It certainly appears the Aussie bears are ready to pounce once again as traders grapple with recent global developments while coming to grips with the market drift following the US Fed rate hike this week.”
ANZ economists said there was also a delayed reaction to the US Federal Reserve’s first interest rate hike in almost a decade
“Interest rate markets reacted to the gradualism in the Fed’s decision, but bringing yields lower (prices higher) over the course of the day. European yields and Australian yields outperformed,” ANZ said
“Understandably, money market yields in the US posted rises to the highest level in the last few years in reaction to the hike.
“We expect the market to be range-bound today.
At 8.30am (AEDT) on Friday, the March 2016 10-year bond futures contract was trading at 97.120 (implying a yield of 2.880 per cent), up from 97.085 (2.915 per cent) on Thursday
The March 2016 three-year bond futures contract was at 97.880 (2.120 per cent), up from 97.860 (2.140 per cent).
Locally on Friday, in equities news, grains marketer Graincorp holds its annual general meeting.
In Australia, the market on Thursday closed higher with investors buoyed by the Fed’s vote of confidence in the world’s biggest economy.
NEW YORK – Wall Street has ended a three-day rally on Thursday, falling 1.5 per cent, dragged down by energy and materials stocks, a day after the Federal Reserve raised interest rates for the first time in nine years
Crude oil prices resumed their slide after gaining earlier in the day on persistent oversupply worries and as the US dollar hit a two-week high. Exxon was down half a per cent, while Chevron slid 1.4 per cent.
Fed Chair Janet Yellen’s assurance that further tightening would be gradual boosted global stock indexes.
However, investors remain concerned about weak global economic conditions as the slide in commodity markets continues unabated and demand slows.
“Investors continue to struggle with the notion of the strength in the US economy, in the context of this performance within global conditions that are mixed at best,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
LONDON – European shares surged on Thursday as investors took the US Federal Reserve’s interest rate rise and the prospect of further tightening as a sign of confidence in the world’s biggest economy.
European indexes came off previous highs as a rally on Wall Street lost momentum the day after the Fed decision.
But cyclical sectors such as automobiles, banking and insurance continued to perform well with gains of 1.5 to 2.8 per cent, featuring among the top sectoral gainers in Europe.
TOKYO – Asian stock markets have jumped as investors chose to take the first hike US interest rates since 2006 as a mark of confidence in the world’s largest economy, also lifting the US dollar but piling on the pain for oil prices.
China allowed its currency slip for a 10th straight session to hit its lowest since June 2011. The steady decline puts pressure on other Asian currencies to depreciate to stay competitive.
The Federal Reserve’s first interest rate increase in almost a decade was one of the most telegraphed policy moves in history.
“They delivered what was the world’s worst-kept secret,” said Neil Williams, chief economist at fund manager Hermes in London.
Markets were soothed by Fed chair Janet Yellen’s assurance that future tightening would be gradual and dependent on inflation finally moving higher, as long forecast.
A stronger US dollar also makes it more expensive for emerging markets countries and firms to pay off US dollar debt, and it comes alongside persistent worries about China’s economy and the impact of the slump in commodity prices on producer states.
WASHINGTON – The US House of Representatives has passed a massive tax bill that makes permanent and enhances tax credits to aid business research and development, the working poor, children and other temporary tax breaks.
The number of Americans filing for unemployment benefits last week fell from a five-month high.
ZURICH – Swiss authorities have banned six former UBS managers and traders for up to five years for failings related to market manipulation in foreign exchange and precious metals.
PARIS – A French court has ordered Christine Lagarde, the head of the International Monetary Fund (IMF), to face trial over her role in a payout of some 400 million euros ($A600 million) to businessman Bernard Tapie, her lawyer says.
ENERGY
Crude oil prices resumed their slide after gaining earlier in the day, on persistent oversupply worries and as the US dollar hit a two-week high.
The oil woes helped push US equities lower after rallying on Wednesday, with the S&P energy index down 1.8 per cent as the worst performing of the 10 major S&P sectors.
“Certainly there is going to be some linkage but the reason that oil has fallen isn’t because of the strength of the dollar it is largely because of the huge influx of supply and production growth across the world, particularly in North America,” said Zirin.
PRECIOUS METALS
Gold prices have fallen more than one per cent, after the Federal Reserve increased US interest rates for the first time in nearly a decade and hinted at more increases in 2016.
The move sent the US dollar up to a two-week high against a basket of leading currencies, while spot gold dipped as much as 1.3 per cent to a session low of $US1,058.44 an ounce and was down $US27.20 at $US1,049.6.
A stronger US currency makes gold more expensive for foreign holders.
“The hints of further rate hikes moved the dollar because the market had priced in two to three more rate hikes in 2016,” Citi strategist David Wilson said.
BASE METALS
Zinc prices have sunk to their lowest in nearly six and a half years and other industrial metals also fell as the US dollar firmed after the first US rate increase in nearly a decade.
Some analysts expressed surprise that zinc was the biggest loser on the London Metal Exchange as Century, one of the world’s biggest zinc mines, was closing.
“Today’s US dollar strength is having an impact on base metals, but what is definitely surprising me is that zinc prices are under so much pressure when the Century mine is actually closing,” said Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt.
Benchmark LME copper ended 1.4 per cent weaker at a week low of $US4,543 a tonne, more than erasing the one per cent gain made in the previous session.
Prices have been building a base above copper’s six-year low of $US4,443.50 a tonne, hit last month.
More copper miners are set to win lower 2016 processing charges from smelters.
ASX stocks to watch on Friday
GNC – GRAINCORP – up 14 cents, or 1.7 per cent, at $8.24: Grains marketer Graincorp holds its annual general meeting.
MSB – MESOBLAST – up 24 cents, or 15.34 per cent, at $1.805: Biotech firm Mesoblast has reported its September quarter losses have narrowed on the back of lower costs.
SGH – SLATER AND GORDON – down 18.5 cents, or 17.21 per cent, at 89.0 cents: Slater and Gordon has dumped its earnings guidance for this financial year due to its UK business performing below expectations.
AAP
