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As the gloom darkens over the global economy, the frenzied sell-off on world sharemarkets has spread to currency markets, and the Australian dollar reached a five-year low of 60.57 cents against the US dollar and a record low against the Japanese yen.

The big fall in the Australian dollar prompted London’s Financial Times to dub the currency the “whipping boy” of foreign exchange markets.

The dollar closed in US trade at US61.78 cents, down US4.5 cents on Friday night and 37 per cent from the high of US98.49 cents it reached three months ago.

The slump in the currency has confounded even the most seasoned of market commentators. The dollar has even been strongly outperformed by Iceland’s hapless krona and Brazil’s real over the weekend.

“It’s just strange. It’s just weird,” said the chief economist of BT Financial Group, Chris Caton. Dr Caton said about one-third of the fall in the dollar could be explained by the recent surge in the US dollar, which has risen against major currencies such as the euro and the British pound.

“There’s no rational reason for us to be at 62 cents,” he said.

The chief equities economist with CommSec, Craig James, said the recent fall in the dollar could be a blessing for the slowing domestic economy because it would provide a boost to exports.

“It’s something we shouldn’t fear here in Australia.”

Like the fall in the currency in 1997 that helped buffer Australia against the ravages of the Asian economic crisis, Mr James said, the weekend’s slump could offer protection against the current global financial turmoil.

Importers, especially retailers, face the challenge of paying more for goods that will be increasingly difficult to sell in a slowing economy.

The convergence of a housing collapse and a lockup in lending has created the worst financial crisis in more than a half-century. Alan Greenspan, who ran the Fed for 18 1/2 years, called it a “once-in-a century credit tsunami,” and conceded that he made mistakes that may have aggravated the economy’s slump.

With a recession seen as inevitable, if not already under way, any Fed rate cut would be aimed at cushioning the fallout.

Vanishing jobs and shrinking paychecks have forced consumers to cut back sharply. Millions of ordinary Americans have watched their 401(k)s and other nest eggs shrink and the value of their homes drop, making them feel in even worse financial shape. In turn, businesses have cut back on hiring and other investments as customers hunker down and credit problems make it harder and more costly to get financing.

“These are sobering times,” said Paul Kasriel, chief economist at Northern Trust Co.

All the problems have been feeding on each other. So far, Fed Chairman Ben Bernanke and his colleagues haven’t been able to break the vicious cycle, despite hefty rate reductions and a flurry of unprecedented steps aimed at getting credit flowing more freely again.

Bernanke says he’ll use all tools to battle the crisis.

To that end, Fed policymakers are widely expected to lower the central bank’s key interest rate at the conclusion of a two-day meeting Wednesday — their last session before the November elections.

Investors and some economists predict the central bank will drop the rate by half a percentage point to 1 percent. If that happens, it would mark the lowest rate since the summer of 2004. Others, however, think the rate will be cut by a smaller, quarter-point to 1.25 percent.

In turn, rates on home equity, certain credit cards and other floating-rate loans tied to commercial banks’ prime rate should drop by a corresponding amount. A half point reduction would leave the prime rate at 4 percent; a quarter-point cut would drop the rate to 4.25 percent. Either way, the prime rate would be the lowest in more than four years.

The group also warned farmers to get used to the lack of rain because dry conditions are expected to continue.

“Words like drought … have negative connotations for farm families,” a report by the Drought Policy Review Expert Social Panel found.

“There needs to be a new national approach to living with dryness, as we prefer to call it, rather than dealing with drought.”

The country is currently in the grip of “the big dry” – a drought which has lasted seven years so far and is crippling the farming sector.

A U.S. military official said the raid by special forces targeted the network of al-Qaida-linked foreign fighters moving through Syria into Iraq. The Americans have been unable to shut the network down in the area because Syria was out of the military’s reach.

“We are taking matters into our own hands,” the official told The Associated Press in Washington, speaking on condition of anonymity because of the political sensitivity of cross-border raids.

The attack came just days after the commander of U.S. forces in western Iraq said American troops were redoubling efforts to secure the Syrian border, which he called an “uncontrolled” gateway for fighters entering Iraq.

A Syrian government statement said the helicopters attacked the Sukkariyeh Farm near the town of Abu Kamal, five miles inside the Syrian border. Four helicopters attacked a civilian building under construction shortly before sundown and fired on workers inside, the statement said.

The government said civilians were among the dead, including four children.

A resident of the nearby village of Hwijeh said some of the helicopters landed and troops exited the aircraft and fired on a building. He said the aircraft flew along the Euphrates River into the area of farms and several brick factories. The witness spoke on condition of anonymity because of the sensitivity of the information,

Syria’s Foreign Ministry said it summoned the charges d’affaires of the United States and Iraq to protest against the strike.

“Syria condemns this aggression and holds the American forces responsible for this aggression and all its repercussions. Syria also calls on the Iraqi government to shoulder its responsibilities and launch and immediate investigation into this serious violation and prevent the use of Iraqi territory for aggression against Syria,” the government statement said.

The area targeted is near the Iraqi border city of Qaim, which had been a major crossing point for fighters, weapons and money coming into Iraq to fuel the Sunni insurgency.

Iraqi travelers making their way home across the border reported hearing many explosions, said Farhan al-Mahalawi, mayor of Qaim.

On Thursday, U.S. Maj. Gen. John Kelly said Iraq’s western borders with Saudi Arabia and Jordan were fairly tight as a result of good policing by security forces in those countries but that Syria was a “different story.”

“The Syrian side is, I guess, uncontrolled by their side,” Kelly said. “We still have a certain level of foreign fighter movement.”

He added that the U.S. was helping construct a sand berm and ditches along the border.

The U.S. Federal Reserve is expected to cut rates sharply following share selloffs and currency collapses in developed economies and the emerging markets of Asia and Latin America.

Advance third-quarter U.S. economic growth data due on Thursday is expected to show a 0.5 percent contraction in gross domestic product after 2.8 percent growth the previous quarter.

Alcoa Inc., Citigroup Inc. and Hewlett-Packard Co. retreated the most in the Dow Jones Industrial Average, losing more than 18 percent, as investors bet the financial crisis spread beyond banks to industrial companies and computer makers. General Motors Corp. approached the lowest price since the 1950s, and Ford Motor Co. plunged 17 percent.

“There are forced sellers and no one willing to stick their neck out,” said Henry Herrmann, Overland Park, Kansas-based president of Waddell & Reed Financial Inc., which manages $70 billion.

The S&P 500 retreated 6.8 percent to 876.77, the lowest level since April 2003. The benchmark index for U.S. equities plunged 25 percent in October. The Dow average fell 5.4 percent to 8,378.95 this week. The MSCI World Index of 23 developed markets lost 8.3 percent, while Brazil, Russia and India drove a gauge of 25 emerging markets to a 17 percent slump.

More than $10 trillion has been erased from the market value of shares worldwide this month as earnings decrease. The 236 companies in the S&P 500 that have reported third-quarter results posted a 23 percent decline on average. Reports yesterday showed the U.K. economy contracted for the first time since 1992 and growth in South Korea was the slowest in four years.

Every Market Falls

All 48 of the developed and emerging markets tracked by MSCI have declined in 2008, with 22 losing at least half their value. The 73 percent plunge by Russia’s Micex Index is the steepest. Benchmark indexes for China, Greece, Ireland, Peru and Austria retreated more than 60 percent. The S&P 500 dropped 40 percent. Morocco and Jordan have done the best, falling 6.4 percent and 19.2 percent, respectively.

It’s “panic creating a freefall as investors simply liquidate anything and everything,” said Walter Gerasimowicz, the New York-based chief executive officer at Meditron Asset Management, which manages $1.1 billion. “The market seems to be very overdone, almost pricing for a depression.”

The Chicago Board Options Exchange Volatility Index, or VIX, a gauge of how much investors are paying for insurance against S&P 500 declines, rose 13 percent to a record 79.13 this week.

American Alan Bel – who had lived in Salford for 30 years after finishing working for the secretive agency – may well have been saved if staff had been alerted that he was having a heart attack.

Consultant cardiologist Dr Bernard Clarke told a Manchester inquest that `on the balance of probabilities’, Mr Bel, a retired businessman and pastor, would have survived.

A hospital investigation wasn’t able to establish who turned the alarm’s volume control down, or when. Bosses have now employed four extra nurses to monitor patients – at a cost of £120,000 a year.

Manchester coroner Nigel Meadows has used new powers to write to the hospital and Hertforshire-based Spacelabs Medical, who make the machine, calling for a more thorough investigation, a review of all monitoring machines at the MRI; and for machine maintenance to be properly recorded.

Mr Bel, originally from Texas, where he worked for the CIA, had a history of heart problems. He had a pacemaker fitted in 2000, but it had to be removed last year and he was hooked up to the monitor.

Mr Bel died of a heart attack last November, half an hour after he was seen alive by nurses.

Investigations revealed the volume on the alarm, which would have alerted staff, had been turned down – and they had not realised this.

Mr Bel’s daughter nurse Carolyn Birtwistle, from Swinton, has employed Manchester-based Pannone LLP to bring a legal case against the hospital to try to make sure this doesn’t happen to anyone else.

Coroner Mr Meadows recorded a narrative verdict at an inquest on October 13

Mr Bel worked in the CIA until he married, before moving to Salford and setting up his own security business. He and his wife Diane had five children and nine grandchildren.

Tens of thousands of Australians, many of them retirees, are now unable to get immediate access to their capital after AXA Asia Pacific, Perpetual Investment Management and Australian Unity suspended withdrawals from some funds.

Treasurer Wayne Swan responded last night by advising people adversely affected to go to Centrelink to see if they were eligible for income support.

But the Government did not appear to have an immediate answer to the cascading problem, and Mr Swan’s comments were seized on by the Coalition, which accused him of insensitivity and incompetence.

As the row erupted, Mr Swan and Prime Minister Kevin Rudd last night met the chief executives of the nation’s four biggest banks – Commonwealth, NAB, ANZ and Westpac – to discuss the financial crisis.

The meeting in Canberra came after another day of carnage on world markets, with Australia’s ASX-200 index plunging more than 4.4%.

The freezing of funds by AXA, Perpetual and Australian Unity came in response to a flood of people trying to withdraw money – mainly from mortgage funds – and transfer it into banks to take advantage of the Government’s decision to guarantee deposits.

By last night, four of the nation’s five biggest mortgage fund managers had either suspended or put restrictions on withdrawals from funds worth billions of dollars. Industry sources said up to 180,000 individuals were affected, with an average investment of about $40,000 each.

The funds are favoured by older, retired people because they provide a steady income stream. While there is no apparent threat to people’s savings, the freeze means those wanting access to more than the regular income payments might be unable to do so for some time.

Senior Perpetual executive Richard Brandweiner said that from last night, the company would allow only quarterly redemptions, and these would be dependent on the level of funds available at the time.

He blamed the situation on “a sudden spike in redemptions” after the Government flagged its bank deposit guarantee and “subsequent actions by other parties”.

A spokeswoman for AXA said the company had to act after withdrawals by investors yesterday soared to about 20 times the daily average.