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Dollar under pressure as sharemarkets fall

The Australian dollar is more than a third of a US cent lower and has extended losses against other major currencies after global stock markets dropped overnight.

In early trade, the Australian dollar was buying $US1.0388, down from $US1.0435 cents yesterday afternoon.

Market participants said the dollar, the worst performing major currency on Wednesday, was also stung by speculation that the Reserve Bank may cut interest rates from 4.25 pe rcent next week.

RBA officials have sounded content with rates in recent weeks and interbank futures imply only a 40 per cent chance of an easing to 4.0 per cent at the April 3 meeting.

The currency also suffered against the yen, which rallied across the board on speculation that Japanese investors were buying yen to repatriate funds ahead of the country’s financial year end.

The Aussie was recently trading at 86.05 yen, and also buying 77.96 euro cents, slipping below 78 euro cents for the first time since late December.

St George chief economist Hans Kunnen said the currency’s fall today mirrored the performance of resource stocks as pessimism spread through global markets.

Miners Fortescue, BHP Billiton and Rio Tinto were all trading lower at noon, helping to drag the ASX200 into negative territory at noon.

‘‘There is clearly some uncertainty about global economic growth that is being fed through to the stock market through resources and to the currency as well,’’ he said.

Stock markets in Europe and New York fell overnight and the negative sentiment spilled over into Asian markets,  with Japan’s Nikkei down 0.6 per cent at noon.

However, Mr Kunnen said, the Australian dollar could turn around later today as investors took advantage of its relatively low level.

‘‘I think, given the pace of the decline this morning, it may have a firmer afternoon if people re-assess their views that the world is not stopping to spin.’’

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