The Australian dollar dipped to lows below the 0.66 level against the US currency during the week and it was subjected to renewed selling on Friday as market tensions intensified with a decline to below the 0.65 level.
The Australian currency was undermined by a sharp decline in metals prices as global economic fears increased while there risk appetite remained at extremely low levels with stock markets unable to sustain any gains
The inflation data was slightly stronger than expected with a 1.3% increase in prices for the third quarter, although the impact was limited as inflation data has been overtaken by events with markets expecting further rapid interest rate cuts.
The Australian dollar moves will remain correlated strongly with trends in risk aversion and the degrees of confidence in the global economy. Some corrective recovery is realistic in the short-term with volatility at extreme levels.
Canadian dollar:
There was intense volatility in the Canadian dollar over the week. From a peak close to 1.13, the Canadian currency weakened dramatically to lows near the 1.28 level as the US currency secured rapid gains.
The Bank of Canada sanctioned a 0.25% cut in interest rates to 2.25% compared with expectations of a 0.50% cut while the bank also suggested that rates would be cut further over the next few months.
The Canadian dollar continued to suffer from the sharp decline in commodity prices and the downgrading of growth prospects both for Canada and globally.
The Finance Ministry suggested that there could be a further fiscal stimulus to help support the economy, but confidence in the economy remained extremely fragile.
The Canadian dollar will remain vulnerable if there are increased fears over the global economy, but there is scope for a corrective recovery following rapid recent losses.
Indian rupee:
The rupee remained under serious pressure as stresses in global markets remained at elevated levels. The rupee dipped to record lows beyond the 50.0 level against the dollar as underlying US currency demand remained strong.
There was central bank intervention to help support the currency and it regained the 50.0 level on Friday. The central bank also acted to cut interest rates with the key lending rate reduced by 1.0% to 8.0%. The government lifted restrictions on foreign borrowing in an attempt to boost the economy.
The degrees of risk appetite and global growth fears will tend to remain dominant for now with the rupee under pressure unless there is a sustained recovery in risk appetite.