The Australian dollar has plummeted to a two-year low, buying approximately 62 cents against the US dollar, following the Federal Reserve’s latest interest rate cut of 0.25 per cent. This decline marks the weakest exchange rate since October 2022 and sees the Aussie dip below 50 pence against the British pound for the first time since the pandemic began.
The local sharemarket also suffered, with the ASX200 dropping by 1.7 per cent to its lowest point since November last year. The US Federal Reserve’s easing, its third cut of the year, prompted significant market shifts. However, forecasts indicate a more cautious approach ahead, with potential further cuts likely limited to just two in the coming year, attributed to persistent inflation concerns.
This led to a substantial sell-off on Wall Street, resulting in the Dow Jones Industrial Average tumbling over 1,100 points and the Nasdaq composite falling by approximately 3.5 per cent, marking the worst day for the US market in four months. Australian investors felt the repercussions, witnessing a minor dip yesterday that escalated today.
In a rare positive for the Aussie dollar, it surged against the New Zealand dollar, which faced severe downturns following news of a significant recession in New Zealand, as its GDP contracted by 1 per cent in the September quarter.