Australian Dollar Drops to Six-Yr Lows on Greece, China Woes

 
   By James Glynn 
 

        SYDNEY--The Australian dollar traded at its lowest level in 6 years against the U.S. dollar in Asia Monday, rocked by an unexpected outcome in the Greek referendum over the weekend, weakness in the iron price, and fresh jitters over Chinese share prices.
        At 0600 GMT, the Australian dollar was trading at US$0.7474, compared with US$0.7583 late Friday.
        More than 61% of Greeks voted "no" in the referendum on austerity measures and other overhauls that European and International Monetary Fund officials had demanded in recent talks.
        The result of the vote could deepen the rift between Greece and the rest of Europe and push the country closer to bankruptcy and an exit from the euro.
        "It will be very difficult for a new deal in Greece to be struck without significant concessions from the Greeks, with the referendum's 'no' vote likely to make that unlikely," said BNP Paribas in a market note. BNP economists said they now place a 70% chance of a "Grexit."
        Meanwhile, stocks in Shanghai turned negative Monday despite efforts by Beijing to stem a three-week selloff.
        China's indexes cooled after an initial spike earlier Monday. The Shanghai Composite turned negative despite earlier gaining as much as 7.8%.
        China's central bank indirectly will help investors borrow to buy shares and regulators over the weekend also agreed to halt all new initial public offerings.
        Rob Rennie, head of currency strategy at Westpac, said uncertainty in global markets is likely to see the Australian dollar fall further in coming months.
        Mr. Rennie forecasts a fall in the Australian dollar to US$0.7200 by December as falling commodity prices also weigh on the market.
        Iron ore fell 3% Friday to US$54.10/ton, according to The Steel Index. For iron ore, a weakening Chinese steel market has been heaping pressure on prices: its spot price plummeted 11% last week.
        Tuesday will see the board of the Reserve Bank of Australia convene to discuss interest rate settings, but no change is expected at the meeting.
        The RBA cut rates in February and May, citing slow growth and meek inflation pressures. RBA Governor Glenn Stevens said in June he remains open to cutting rates further if needed, but indicated no rush to do so, citing risks of overheating the property market, especially in Sydney.
        "It's clear the bank remains in wait-and-see mode with its figure on the policy-trigger, but it's not ready to shoot yet," said Chris Tedder, research analyst at FOREX.com.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 06, 2015 02:04 ET (06:04 GMT)

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