The Australian dollar dropped below 87 U.S. cents for the first time since July 2010 after China’s bank regulator ordered regional offices to increase scrutiny of credit risks in the coal-mining industry, according to people with knowledge of the matter.
The Aussie slid versus all 16 major peers after the Wall Street Journal cited central bank board member Heather Ridout as saying around 80 cents would be a fair deal for everybody. The nation’s three-year bond yield slid by the most in four months amid increased demand for the relative safety of sovereign bonds. New Zealand’s dollar also fell.
Both stories have “combined to hurt the Aussie,” said Greg Gibbs, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “The Australian dollar is going to be treated as low-risk insurance against possible financial stress in China.”
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