The Australian dollar yesterday slumped to its weakest level in six years as a gauge of Chinese manufacturing worsened and the most accurate forecaster of the currency cut its forecasts.
Australia's currency tumbled 0.8 per cent to 72.98 US cents as of 7.43am in London after sliding to 72.69, the lowest since May 2009.
The Australian dollar fell at least 0.5 per cent against all 16 major peers after Caixin Media and Markit Economics said that their flash manufacturing index for China unexpectedly fell to the lowest in 15 months.
Rating agency Standard & Poor's said it may lower Australia's credit rating if the country's budget does not improve.
China's numbers "were very weak", said Mr Roy Teo, a currency strategist at ABN Amro Bank in Singapore. "Everything looks bearish at the moment."
He said the Reserve Bank of Autralia will likely cut its key interest rate from an already record low of 2 per cent in September.
The Australian dollar has slumped 5.4 per cent this month, making it the worst performer versus the greenback among the Group of 10 currencies.
It dropped to as low as 1.0031 against the Singdollar at the beginning of this month. It has fallen about 8 per cent since the start of the year and 16 per cent since July last year.
Slowing Chinese growth means less demand for commodities such as iron ore, one of Australia's chief exports. China is Australia's major trading partner.
"The decline in commodities prices recently is still to be fully priced in to the Aussie," said Mr Michael Sneyd, a BNP Paribas strategist in London. He forecast it to fall to US$0.70 at the end of the year.
BLOOMBERG, REUTERS
