The Australian dollar hovered near its weakest in 11 months on Friday after a resurgent greenback took out huge chart levels overnight, leaving it on track to end the week with hefty losses.
The Aussie was under fire at $US1.0075, having fallen as deep as $US1.0046, its weakest since late June. It tumbled more than 1 per cent on Thursday after key support at $US1.0150 finally gave way. It has skidded 2.3 per cent since Monday, the largest weekly decline in a year.
Aussie dollar weakens against US
BusinessDay AM news editor Thomas Hunter says the weakening Aussie dollar is good news for some while others face a loss.
It barely reacted after the Reserve Bank of Australia (RBA)'s quarterly policy outlook revealed no surprises. The central bank cited lower forecasts for inflation and the likelihood of subpar growth into next year as some of the factors behind this week's cut in interest rates.
The central bank gave no clear indication it would ease again, which gave investors an excuse to slightly pare back expectations of a follow-up cut as early as next month to a record low of 2.5 per cent.
"The easing bias was not explicitly stated but the risks lie with another rate cut in August following the next inflation update," said Michael Workman, an economist at Commonwealth Bank of Australia.
Interbank futures give a 50-50 per cent chance of an easing in July, while swap markets pricing implies one more cut over the coming year.
Government bond futures also sold off with the three-year contract 0.08 points lower at 97.360 and the 10-year contract eased 0.075 points to 96.770.
"We suspect the new (RBA) forecasts were seen as 'less dovish' than the markets expected," said Alvin Pontoh, a strategist for TD Securities in Singapore.
Key support for the Aussie was seen at the 61.8 per cent of the $US0.9581-$US1.0625 rise at $US0.9980, with traders citing good selling interest ahead of $US1.0150.
The Aussie hovered near multi-month lows against the euro, pound and Canadian dollar, but trimmed losses on the yen which tumbled against a racy US dollar.
A driving force behind the ferocious US dollar ascent appeared to be massive buying of US dollars for yen in New York which crushed the 100 barrier and tripped option bids.