Australian dollar tumbles on Chinese fears

Financial and commodity markets analytics

The Australian dollar was crushed yesterday almost breaking down through the US70c mark, as worries over China emerged after another big fall in the Chinese stock market.

After reaching a low of US70.12c the Aussie dollar has somewhat recovered to be trading at US71.79c 5pm(GMT).

China’s stock market fell another 8% yesterday, bringing its recent losses to 40% which is well within the definition of a bear market  and leaving terrified investors exiting emerging markets and commodity currencies like the Australian dollar.

The market was moving so fast yesterday the traders found it difficult to place a trade with spreads on some of the major currencies reaching 30 pips .

As the Aussie dollar approached the US70c mark traders began to buy the currency as the feeling was it had fallen to far and they felt that they could snap up  a bargain.

"It got caught up in the stock market volatility, exacerbated by thin liquidity as participants stepped back to the sidelines." Noted Commonwealth Bank of Australia's chief currency strategist Richard Grace.
 

"This helped offset the negative risk sentiment around the dollar and it has bounced back from that," Mr Grace said.