Dollar drops below US95 cents

THE Australian dollar dropped to its lowest level in more than two and a half years amid share market weakness and a stronger US dollar.

Australian currency.

THE Australian dollar dropped to its lowest level in more than two and a half years amid share market weakness and a stronger US dollar.

The currency dropped below 95 US cents this morning shortly after the share market started trading and fell as low as 94.71 US cents, a level not seen since September 2010.

By 12pm AEST it had recovered slightly and was trading at 95.02 US cents, still down from 95.83 cents yesterday afternoon.

Easy Forex senior currency dealer Francisco Solar said the Australian dollar was increasingly unpopular among investors due to lower interest rates and disappointing domestic and Chinese economic data.

The Reserve Bank of Australia cut the cash rate to a record low of 2.75 per cent in May and has indicated it has room to cut further.

Meanwhile, US economic data has generally improved in recent months, which has helped the US dollar.

"It really is a snowball effect for the Aussie dollar where there is more and more reason for it to continue going lower," he said.

Meanwhile, Australian shares were lower today, following sharp losses on US and European stocks, which further boosted the US dollar.

Mr Solar said the next key level for the Australian dollar was around 93.87 US cents; and if it falls below that level it could continue to sell off sharply.

Meanwhile, Australian bond futures prices were higher at noon.

At 12pm AEST, the June 10-year bond futures contract was trading at 96.640 (implying a yield of 3.360 per cent), up from 96.610 (3.390 per cent) yesterday afternoon.

The June three-year bond futures contract was at 97.430 (2.570 per cent), up from 97.330 (2.670 per cent) previously.

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