Australian dollar two-year low : The Australian dollar has dropped to its lowest point in two years, driven by the Federal Reserve’s decision to cut interest rates in the United States, while the local share market has also declined.
By midday, the Aussie was trading at approximately 62 cents against the US dollar, marking its weakest exchange rate since October 2022.
Additionally, it fell below 50 pence against the UK pound for the first time since the pandemic began.
Australian Dollar Hits Two-Year Low as US Interest Rate Cuts Shake Markets
The local share market also took a hit, with the ASX200 dropping 1.7 percent by midday, reaching its lowest point since early November.
The downturn was triggered by the US Federal Reserve’s decision to cut interest rates by 0.25 percent, marking its third reduction this year.
However, the Federal Reserve projected it would likely lower the cash rate only twice next year, revising down its earlier forecast of four cuts.
Federal Reserve Interest Rate Cuts Drive Aussie Dollar Decline
“A slower pace of rate cuts likely reflects the higher inflation readings we’ve seen this year and the expectation that inflation will remain elevated in 2025,” said Federal Reserve Chair Jerome Powell.
“We’re approaching the neutral rate, which is another reason to proceed cautiously with further adjustments.”
This triggered a sharp selloff on Wall Street, resulting in the worst day for the US market in four months.
The Dow Jones Industrial Average plunged over 1,100 points, a decline of approximately 2.5 percent, while the Nasdaq Composite fared even worse, dropping around 3.5 percent on Wednesday.
Read More:- ANZ Revises Interest Rate Forecast: Cash Rate Cuts Delayed to May 2025
The ripple effects reached Australian investors, with the ASX experiencing a modest decline yesterday followed by a much steeper drop today.
However, there was a glimmer of positive news for the Australian dollar, which surged against the Kiwi dollar. The New Zealand currency took a hit after news broke that the country had entered a deep recession, with GDP contracting by 1 percent in the September quarter.
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