The Australian dollar opened firmer today as an appreciation in the euro helped the local unit hold its ground against the US currency, even as Wall Street continued to slide.
But the domestic currency is tipped to fall back to $US0.6000 in coming weeks as more bad news on global equity markets curtails demand for high-yielding currencies.
At 0700 AEDT, the Australian dollar was trading at $US0.6453/57, up by 0.1 per cent from Wednesday's close of $US0.6444/49.
During the offshore session, the local unit moved between a late night low of $US0.6438 and a high of $US0.6595, a 2.4 per cent range.
The low point was 7.1 per cent above late October's five and half year low of $US0.6012, but 34.6 per cent below mid-July's 25-year high of $US0.9849.
Just 21 minutes after the local session began, the Australian dollar fell below its overnight low to hit $US0.6421.
The Australian dollar held above Wednesday's closing levels for most of the offshore session, even though New York equities had another bad day.
In recent days, a decline on Wall Street has hurt higher-yielding, higher risk currencies like the Australian dollar, but the local unit benefitted as the euro rose to a one-week high of 1.28 US dollars.
Deutsche Bank foreign exchange strategist John Horner said traders also saw the Australian dollar as oversold, even in the risk averse environment.
"We had further falls in equity markets and further falls in commmodity prices," he said.
"What's interesting is that the magnitude of falls (in the Australian dollar) is less than what would be expected given the magnitude of falls we've seen in equity markets overnight.
"Perhaps, a good part of the deleveraging that we've seen in the Australian dollar in September and October has run its course."
