Aussie Slides After S&P Lowers Australia’s Outlook to Negative

Australia’s dollar dropped the most among major currencies Thursday after S&P Global Ratings cut the outlook on the nation’s AAA bond rating to negative from stable.

The Aussie fell as much as 0.7 percent against the dollar, erasing its gains for the week, after the ratings company said in a statement that “without remedial action the government’s fiscal stance may no longer be compatible with the country’s high level of external indebtedness.” The lower outlook follows an inconclusive general election result at the weekend.

“The negative outlook was clearly a risk, and arguably the market has been living in its shadow since Monday morning,” said Robert Rennie, the global head of currency and commodity strategy at Westpac Banking Corp. in Sydney. “We should see 74 U.S. cents tested later in the day.”

The Australian currency was 0.3 percent lower at 75.01 U.S. cents as of 12:10 p.m. in Sydney from Wednesday.

“We do not believe S&P’s news is a trigger for a big fall,” said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia. “After all, the rating has not been cut, merely the risk of a cut to the rating has increased.”

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