Dollar falters as global risks eyed

The local unit has continued to lose ground as Brexit worries spread through global markets.

The Australian dollar is faltering as Brexit contagion spreads through financial markets.

At 5pm (AEST) on Wednesday, the currency was trading at US74.42 cents, down from US74.63c on Tuesday.

Investors are flocking to the greenback due to fears about the economic impact of Britain’s departure from the European Union, OANDA Australia and Asia Pacific senior trader Stephen Innes said.

Global oil prices tumbled 5 per cent overnight, though have since recovered some of that ground, while Wall Street stocks and the British pound also fell.

“A strong US dollar is bad for commodity prices, and therefore the Aussie dollar,” Mr Innes said.

It comes as the British pound slumped to fresh 31-year low overnight, and the Bank of England slashed bank capital requirements in effort to shore up the country’s financial stability.

Risks arising from Brexit were starting to “crystallise”, the central bank said.

Locally, ANZ strategists said the Reserve Bank’s August policy meeting is now “live” for an interest-rate cut.

“While activity and employment growth remain solid, inflation is weak and the rise in uncertainty generated by the Brexit vote in the UK and the unresolved federal election result locally suggests to us that further monetary policy easing is likely,” ANZ said.

The Reserve Bank of Australia left its cash rate target unchanged at 1.7 per cent on Tuesday, but also introduced an easing bias, signalling it was looking to data to see if policy needs to be changed.

Some three million votes are yet to be tallied following Saturday’s Federal election, and the outcome may yet not be know for several days. Prime Minister Malcolm Turnbull and Labor opponent Bill Shorten have begun wooing a handful of independent and small-party lawmakers -- advocates of policies from looser immigration laws to steel bailouts -- who might help form a minority government.

The Australian data calendar was clear on Wednesday, with a speech by the Reserve Bank of Australia’s Guy Debelle scheduled for Wednesday evening not expected to be market-moving, said NAB’s currency strategist Rodrigo Catril. In offshore markets, all of the highlights will come from the US, he said, including Federal Open Market Committee minutes and an ISM non-manufacturing survey.

- with AAP, Dow Jones newswires