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New low for Aussie dollar

The Australian dollar has crashed to a new record low of 52.88 US cents this morning - and currency dealers warn it may fall further still.

''Obviously it still looks very vulnerable,'' Salomon Smith Barney currency and bond strategist Stephen Halmarick said.

Arab Bank dealer Scott Young said it appeared market speculators were again testing the currency to see how low it could go.

''When we get close, it's like a red rag to a bull.''

''Guys see stuff on their order book and they think: 'That's close, let's see if we can get that down''' Mr Young said.

Mr Halmarick said the local unit hit its new record low just before 8:30 AEDT this morning, falling with the beleaguered euro which dropped overnight, despite the European central Bank's 25 basis point rise in key interest rates.

The euro is currently buying 86.89 US cents, from 87.44 at yesterday's close.

The Australian dollar closed yesterday at 53.64 US cents.

''You'd have to consider at this stage whether there may be some official intervention or not,'' Mr Halmarick said.

He said the Reserve Bank of Australia was unlikely to raise official interest rates to stem the currency's fall, having passed up the opportunity to tighten monetary policy at its meeting last Tuesday.

''It'd be difficult to see an inter-meeting rate rise, so intervention in the (currency) market is more likely until we get the November board meeting.''

Mr Young said the Reserve Bank would now be sorely tempted to intervene, but may be reluctant to do so until it was sure to have a sustainable impact.

''When they hit they usually try to get value for their money and really catch the market unaware so it works for them,'' he said.

But Mr Young said it was anybody's guess as to at what point the central bank would intervene.

''We're past those obvious levels, those previous lows that psychologically would either help support the market or where you could see them defending,'' he said.

''They might be throwing up their hands, put it that way.''

Mr Young said if the central bank was seen to have tried and failed to prop up the local unit it could cause more damage.

''That is a green light to the speculators to sell it even lower, so they have to have a modicum of success in holding it up for at least a little while,'' he said.

The Australian dollar recovered to 53.1 US cents by 9:00 AEDT.

A Reserve Bank spokesperson declined to confirm or deny whether the central bank had stepped in to buy up the Australian dollar and therefore support the price.

-- Martin Thompson (, October 05, 2000

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