Dollar slides into role of whipping boy
The sharp fall in the Australian dollar on Thursday highlighted the reversal in its fortunes, as it moves from being the darling of global investors to their "whipping boy".
Investors rushed out of the risky asset as the US Federal Reserve tipped an end to its stimulus program.
The currency plunged to a 33-month low of US92.62¢, a fall of nearly US3¢, after the statement.
It extended its drop to US92.42¢ shortly before midday on Thursday as new data from China showed its manufacturing sector weakening in June to a nine-month low. Last night it was at US91.93¢.
While other commodity currencies such as the Mexican peso, Brazilian real and South African rand have also declined against the US dollar, the Australian currency - as one of the world's most traded - received special attention from investors, currency strategists said.
"It's become a whipping boy for the broader market turmoil that we are seeing," NAB head of currency strategy Ray Attrill said.
"That's probably why it has fallen almost more than any other emerging-market currency ... people have learnt to use it almost as a proxy for broader risk aversion and as the hedge against, for example, long equity portfolios."
Westpac chief currency strategist Robert Rennie said the dollar was "singled out in recent sessions for some pretty aggressive treatment" and could fall further, with financial markets looking to US91.88¢ as the next psychological barrier.
The recent volatility in the value of the dollar and expectations of a lower interest rate meant the currency was becoming less attractive in the "carry trade", Rochford Capital director Derek Mumford said.
The carry trade involves borrowing currencies with low interest rates and investing in those with higher interest rates. An increase in the volatility of a currency would expose investors to losses.