$A tumbles through US70¢ as weakness deepens

The Australian dollar is suffering its worst start to a year since it began trading freely three decades ago.

The Aussie fell as low as US69.81¢ about 8am in New York on Thursday, its lowest level since September, before paring some of its losses to trade down 0.7 per cent at US70.20¢ at 11.19am. It has fallen more than 4 per cent since December 31 in the worst start to a year since currency controls were scrapped in December 1983, according to data compiled by Bloomberg.

The Australian dollar briefly broke through US77 cents overnight before easing
The Australian dollar briefly broke through US77 cents overnight before easing Photo: Glenn Hunt

Australia, New Zealand and Canada's currencies are among those bearing the brunt of the disruptions in China, a key buyer of those nations' commodity exports. The New Zealand dollar dropped 0.5 per cent to US66.06¢, leaving it about 3.3 per cent weaker in 2016. The Canadian dollar slipped 0.5 per cent to $C1.4151 per greenback, having depreciated to a 12-year low of $C1.4170.

If the first week of 2016 has shown one thing, it's that when it comes to safe havens the yen is still No. 1.

Investor confusion over China's monetary and stock-market policies have sent Japan's currency surging to its strongest level since August versus the US dollar. The central bank of the world's second-largest economy cut its yuan reference rate by the most since August, before speculation it had intervened to prop up the exchange rate prompted a rally.

"The yen is the pre-eminent risk-adverse currency, and the euro is not far behind," Kit Juckes, global strategist at Societe Generale said in an interview on Bloomberg Television's "Surveillance" with Francine Lacqua and Tom Keene. "Both are places where capital is exported to invest in attractive opportunities around the world. When things go badly wrong, that's when it comes back."

Japan's currency advanced 0.7 per cent to 117.60 to the dollar at 8.01am New York time, after touching 117.33, the strongest level since August. It was little changed at 127.73 per euro, while Europe's shared currency jumped 0.8 per cent to $1.0864.

The offshore yuan traded in Hong Kong swung between gains and losses and touched its weakest level since 2010.

"By cutting the yuan fixing, it signals they might be doing more devaluation," said Bernard Aw, a strategist at IG Asia in Singapore. "This will have a crimping effect on Chinese demand for commodities and affect the economies of its trading partners, which is why we're seeing a weakening of the Australian and New Zealand dollars."

Bloomberg