The Australian dollar has dropped sharply below the US87.00 cents level as Iron ore prices fell sharply overnight and Prime minister Abe of Japan called snap elections.
At 6.30pm (AEDT) the local currency was trading at US86.71 cents down from US87.19 cents yesterday.
Iron ore is now sitting at a five-year low dropping around 50% since the start of the year.
“The move lower in the iron ore price has seen the Australian dollar/US dollar sharply lower,” Western Union Business Solutions currency strategist Steven Dooley said.
“Iron ore is Australia’s largest export, closely tied to our terms of trade, and a fall would naturally push the Australian dollar lower.”
The move by Japan’s Abe to call snap elections pushed the US dollar to a seven year high against the Yen which in turn caused the Aussie dollar and a basket of other currencies to move lower. There is speculation that the Japanese prime minister may try to delay a planned sales tax increase if he is re-elected.
Later today, the market will focus on the latest FOMC minutes meeting from the US federal reserve where speculation of the timing of an Interest rate rise will be the hot topic and could put further pressure on the Australian dollar.
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