Dollar falls from 23-year highs

Dollar falls from 23-year highs

November 03, 2007 12:00am

THE Australian dollar closed one and a half cents weaker yesterday after renewed credit fears sent traders scurrying towards the safety of the US dollar.
At at close of local trade yesterday, the Australian dollar was trading at 91.63 US cents, down one and a half US cents from yesterday's close of 93.14 US cents.

Commonwealth Bank chief currency strategist Richard Grace said the Australian dollar was sold off strongly as risk aversion returned and equity markets fell.

Sparking concerns was a newspaper report on Thursday in the US that Merrill Lynch had made deals with hedge funds to delay losses from its sub-prime mortgage sector exposure.

The US Federal Reserve also overnight injected $US41 billion ($A45.03 billion) in temporary reserves into money markets in an effort to boost liquidity. It was the biggest one-day cash infusion since September 2001.

While the Australian dollar remained lower than yesterday's close, Mr Grace said it had been recovering through much of the local session.

”But in late afternoon trade, there's more renewed concerns about the equity market and the health of US financials in particular,'' he said.

”That's put a little bit of a dampener on the Australian dollar and it dragged the Australian dollar/yen down as well.

”But I'd be surprised if it lasts. I suspect the Aussie is going to continue to grind higher.''