Australia: Central Bank Tries to Halt Currency Collapse

October 27th, 2008

Spit balls at the ready… Aim… FIRE!

Via: AFP:

Australia’s central bank intervened Monday to prop up the local dollar after it plunged 3.7 percent against the greenback as investors turned it into the whipping boy of the global financial crisis.

The rare intervention by the central bank was aimed at adding liquidity “in an illiquid market”, a Reserve Bank of Australia (RBA) spokesman said.

The Aussie was trading at 0.6194 to the greenback at midday (0100 GMT), down nearly two US cents from Friday’s domestic close of 0.6388, after hitting a five-year low of 0.6060 in US weekend trade, its weakest since April 15, 2003.

Traders could not estimate how much the central bank purchased to support the local unit, but said that relatively small amounts would have sufficed given the very tight liquidity in the market.

“The RBA has essentially shown their hand in the low 0.60s to the US dollar for the Australian dollar, and one might presume they are in a mind to install a sense of stability for the currency at least for the near term,” said Greg Gibbs, senior currency strategist at ABN AMRO.

Investors worried that the financial turmoil is deepening are dumping the high-yielding Aussie fast, extending its losses against the strengthening US unit to 37 percent since July, when it threatened parity with the US dollar.

Posted in Economy | Top Of Page

One Response to “Australia: Central Bank Tries to Halt Currency Collapse”

  1. il says:
    October 30, 2008 at 7:44 am

    More from Australia (sorry if this is wrong post to add to):

    “Kevin Rudd said Australia’s banks almost collapsed”

    http://www.news.com.au/dailytelegraph/money/story/0,26860,24568263-5015795,00.html

    ‘PRIME Minister Kevin Rudd, vowing to “level with the Australian people”, last night indicated the Australian banking system was on the brink of collapse two weeks ago.’

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