The global economy is headed for a recession next year as the U.S.
expansion almost grinds to a halt, the International Monetary Fund
forecast before a Group-of-Seven meeting this week. Australian
home-loan approvals dropped to a seven-year low in August, according to
government figures reported today.
Shares tumbled across the Asia-Pacific region today, extending a global
sell-off that's wiped out more than $5 trillion of market value in the
past week.
The Australian and New Zealand dollars slumped to their lowest level in
more than five years against the greenback as investors sold
higher-yielding assets on concern frozen credit markets will stall the
global economy.
``The Aussie is a barometer of global financial market sentiment so it
takes a particularly hard hit,'' said Richard Grace, chief currency
strategist at Commonwealth Bank of Australia in Sydney. The Australian
dollar has lost 17.6 percent since the beginning of October and 33
percent since hitting a 25-year high on July 16.
The Australian and New Zealand currencies are popular targets for the
carry trade, where investors seek higher returns on investments funded
in countries with lower borrowing costs. The risk is that exchange-rate
fluctuations erase profits.