The Australian dollar plunged to a more than two-year low against its US counterpart on Thursday, after the US Federal Reserve signalled it expected to cut interest rates in 2025 less aggressively than previously indicated.
The move also led to a big drop for the Australian Securities Exchange, which by mid-afternoon was on track for its worst performance since early August, mirroring a similar drop on Wall Street.
At 2.30pm AEDT on Thursday, the benchmark S&P/ASX200 index was down 160.5 points, or 1.93 per cent, to 8,148.9, while the broader All Ordinaries had fallen 163.8 points, or 1.94 per cent, to 8,392.9.
Overnight the Federal Reserve cut US interest rates as expected, but the consensus of its rate-setting committee was for just two rate cuts in 2025, half the number previously forecast.
"As we think about further cuts, we're going to be looking for progress on inflation," Fed chairman Jerome Powell told a news conference.
Chair Powell answers reporters' questions at the FOMC press conference on December 18, 2024. — Federal Reserve (@federalreserve) https://t.co/siWde1ROZb pic.twitter.com/n4PqHkd1cDDecember 18, 2024
"We have been moving sideways on 12-month inflation."
On Wall Street, the S&P500 fell 3.0 per cent and the Nasdaq dropped 3.6 per cent, while the US dollar rose to a more than two-year high against a basket of other currencies.
The Aussie was buying 62.29 US cents, from 63.13 US cents at close of business on Wednesday.
The Aussie has declined 9.9 per cent in the 80 days since it hit a one-and-a-half-year peak of 69.13 US cents on September 30.
IG analyst Tony Sycamore called its rapid descent "jaw dropping".
In addition to readjusting to interest rate expectations for 2025, the currency has been under pressure because of lacklustre economic data out of China and the threat of a US trade war with Australia's biggest trade partner.
Other than a few days in October 2022, the Australian dollar hasn't been this low against the greenback since very early in the COVID-19 pandemic.
Across the ditch on Thursday, Statistics New Zealand also shocked with the news that NZ's gross domestic product fell one per cent in the September quarter, more than double what economists had predicted.
New Zealand's GDP for the June quarter was also revised downward, meaning the country is in a deep recession.
"Today's forecast miss and subsequent revisions indicate NZ's economic performance is much worse than previously thought," JP Morgan economist Tom Kennedy wrote.
Every sector of the ASX was in the red at mid-afternoon on Thursday, with tech the worst performer, down 2.7 per cent.
In the financial sector, the big four banks had each dropped by between 2.1 and 2.6 per cent.
In the mining sector, BHP was down 1.8 per cent, Fortescue had fallen 4.2 per cent and Rio Tinto had dipped 1.1 per cent.
30°C