Home / World News / ASX slides and Aussie hammered to 19-month low as mighty US dollar rallies

ASX slides and Aussie hammered to 19-month low as mighty US dollar rallies

The Australian sharemarket slipped away from its 10-year high as tumbling emerging market currencies and trade-war risks weighed on global sentiment and the Australian dollar.

Extending overnight losses, the dollar tumbled to a 19-month low of US72.80¢, down US1.4¢ from Thursday, as the embattled Chinese yuan edged weaker against the US dollar in a sign traders were not convinced the People’s Bank of China had enough fire-power to keep it below the psychological 7 to the US dollar level for long.

Volume was well below average as the S&P-ASX 200 index traded down around 0.1 per cent for most of the day, but it extended losses to close down19.2 points, or 0.31 per cent, at 6278.4 on rising volume as the dolalr was hit in late trade.

Resource stocks, industrial and real-estate stocks all struggled.

The US dollar rallied against global currencies as a slump in the Turkish lira and Russian rouble on targeted US sanctions, but the broader sell-off revived concerns about the lingering US dollar funding shortage amid rising US interest rates.

National Australia Bank global head of currency strategy Ray Attrill noted that the dollar’s weakness pre-dated yuan weakness and coincided with the sell-off in other emerging market currencies.

He said the dollar had “proven itself to be the market’s preferred global, not just Asia (emerging market), risk proxy” which explained the “decent” 0.7 per cent overnight drop in line with emerging market weakness.

Government 10-year bond yields fell 3.8 points to 2.615 per cent after US 10-years dropped 3 points to 2.93 per cent as the success of Wednesday’s record $US26 billion bond auction emboldened bond bulls.

The Shanghai composite index struggled to extend Thursday’s rebound and was down 0.3 per cent at the close of the ASX as funding conditions for corporates remained tight despite tumbling interest rates.

Shanghai overnight rates have dived from 2.5 per cent to 1.5 per cent after the People’s Bank of China cut bank reserve requirement ratio, but lending has remained restricted. forcing companies to tap debt markets for funding.

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