By: Associated Press
Source: http://www.theguardian.com/
The Australian dollar tumbled to a three-and-a-half-year low after figures showed the Chinese economy was slowing more than expected.
The currency was trading at 87.56 US cents on Friday afternoon, a fall of nearly one US cent in the space of 24 hours. It earlier fell to 87.32 US cents, its lowest level since July 2010.
“The Aussie is very sensitive to perceptions of risk,” Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia, told Bloomberg. “If you’re an investor and thinking of which currency you want to short because of emerging-market problems, you sell the Aussie because it’s a liquid commodity currency with a current account deficit.” A short position is a bet a currency will fall.
Australia’s benchmark ASX200 stock index followed the dollar downwards at 5251 on Friday afternoon, a drop of 11 points, as global markets saw a sell-off in the wake of the Chinese data.
Stocks fell from the start of trading after an HSBC survey of Chinese manufacturing fell to the lowest point since July and suggested that the country’s factory sector was shrinking. Earlier this week, China reported its slowest annual economic growth since 1999.
The Dow was down as much as 232 points before trimming its loss late in the day. It closed down 175.99 points, or 1.1%, at 16,197.35. The S&P 500 lost 16.40 points, or 0.9%, to 1,828.46.
“It’s pretty ugly,” said Randy Frederick, a managing director of active trading and derivatives at Charles Schwab. “When you’ve got a market that’s near record highs … people are looking for any excuse to take profits.”
Fearful investors poured money into US government debt securities, pushing the yield on the 10-year Treasury note down to 2.78% from 2.86% late Wednesday. That was the lowest since 29 November. Yields fall on bonds when their prices rise.
The price of gold, another safe-play asset, rose US$23.70, or 1.9%, to US$1,262.30 an ounce.
Worries about China also hammered emerging market currencies. The Argentinian peso fell hard, and has now lost 16% of its value in two days, the fastest drop since the country’s economic collapse in 2002. The Turkish lira fell 1.3% and reached a record low against the dollar.
The pullback comes after a stellar run for stocks last year. The Dow rose nearly 27% and the S&P, nearly 30%.
“The market at these levels is a bit skittish,” said James Dunigan, chief investment strategist at PNC Wealth Management. He added that “any kink in the growth story … is going to give investors pause”.