The Australian dollar fell 0.8 percent to $0.7177, partly due to a fall in copper prices, which hit a fresh six-and-a-half year low on concerns about China’s slowing factory demand.
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The dollar index .DXY , which measures the greenback against six major currencies, rose as much as 0.4 percent, touching 100.000, an eight-month high not far from this year’s peak of 100.390.
RBA Head of Economic Analysis, Heath, discussed the impact of the terms of trade cycle (the large increase and subsequent fall in commodity prices) over the past decade.
Gold for immediate delivery was down 0.9 per cent at $1,068.90 an ounce.
European stocks were down 0.5 per cent despite better-than-expected euro zone data. Zinc lost 3.2 per cent, giving up gains made on Friday after Chinese smelters announced plans to cut production.
“More and more investors are watching (commodities sell off) and sentiment therefore gets more jittery”.
The drag from negative yields pulled the euro down to US$1.0637, threatening the recent seven-month trough around US$1.0615.
That also helped Europe’s main bourses claw back a few of their early losses, although the early woes around commodities ensured miners and oil and gas firms remained the worst performers.
The healthcare sector was also in focus after Pfizer secured formal board approval on Sunday for its more than $150bn acquisition of Botox maker Allergan, that will create the world’s biggest drug maker. Soldiers patrolled the streets of Brussels for a third day as the hunt continued for a man believed to have masterminded this month’s Paris attacks.
The Euro weakened with expectations the European Central Bank will add to monetary stimulus in December weighing on the currency.
ECB President Draghi gave another hint that the ECB would increase monetary stimulus in December, saying that if the ECB decides in December “that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible”.
He pointed to two-year U.S. Treasury yields that are now 130 basis points above two-year German bond yields, compared to around 81 basis points in October.
The local currency slipped to 65.56 USA cents from 65.63 cents at the NY close and 65.87 cents on Friday in Wellington after NY Federal Reserve head William Dudley reiterated comments from other Fed officials that the U.S. should “soon” be ready to raise interest rates.
Against a basket of currencies the USA dollar edged up to 99.664, while the it was steady on the yen around 122.93.
MSCI’s broadest index of Asia-Pacific shares outside Japan was all but flat, while South Korea’s main index gained 0.2 per cent. “Interestingly, (equity) markets are treating the prospects of policy divergence reasonably well”, said Jo Masters, a senior economist at Australia and New Zealand Bank.
Investors continue to weigh the outlook for global monetary policy.
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“For him to acknowledge that there’s a strong case for higher rates next month is a strong signal to the market that there’s increasing consensus at the Fed that rates are likely to rise next month”, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
