Aug. 9 (Bloomberg) -- The Australian dollar dropped below parity with the U.S. currency for the first time in five months as prices tumbled for stocks and commodities amid concern fiscal crises in the U.S. and Europe will slow global growth.
The currency slid for a ninth day, the longest losing streak since exchange controls ended in 1983, as traders bet the central bank will cut the developed world’s highest benchmark rate 178 basis points over 12 months, according to a Credit Suisse Group AG index. The Aussie is this month’s worst performer against the greenback among 16 major counterparts.
Australia’s dollar fell as low as 99.99 U.S. cents before trading at $1.0016 as of 11:47 a.m. in Sydney from $1.0187 in New York yesterday. It has dropped 9.8 percent since reaching a post-float record of $1.1081 on July 27. The currency depreciated to 77.32 yen from 79.22 yen yesterday.
The Reuters/Jefferies CRB Index of raw materials has plunged 7.1 percent in August, headed for its worst month since May 2010. The MSCI World Index of equities dropped 14 percent since July 29, extending three straight months of declines.
Raw materials including iron ore and coal account for a majority of exports from Australia.
Benchmark rates are 4.75 percent in Australia, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
--Editors: Garfield Reynolds, Rocky Swift
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