Australia shares dive to 7-month low as China currency, metals downgrade weighs

The Australian sharemarket has opened flat, shrugging off recent falls on global share markets on the back of China’s surprise devaluation of its currency.

Mr Gorey also pointed out that if China further devalued its currency, then the cost of exports could make local product more attractive to Chinese consumers. “It was a highly volatile night for most currencies in the wake of the US payrolls report”, said BNZ’s Kymberly Martin.

“The move yesterday sparked a negative reaction, but, generally, markets see economic stimulus as good news”, he said.

“The greenback is giving back some of its gains from last week”, Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, said by e-mail. The Commonwealth Bank, on Wednesday announced a $5 billion capital raising as it unveiled a five per cent rise in cash profit to $9.14 billion, which was largely in line with expectations.

Traders are pricing in a 52 percent probability that the Fed will raise interest rates in September, based on the assumption that the effective fed funds rate will average 0.375 per cent after the first increase.

“The other one as well is that the US dollar can’t go sideways or down in this context. We’re looking at down around 70 cents at the moment, by the year’s end”, he said. SkyCity Entertainment Group fell 1.9 per cent to $4.21 after lifting full-year profit 31 per cent to $128.7m.

“So there is little net benefit for Australian farm exporters”. Of the day’s few gainers, Orion Health Group was the best performer up 2.1 per cent to $3.97.

The dollar hit a two-month high of 125.07 yen on Friday, and was last up 0.5 percent at 124.75, buoyed by elevated two-year US Treasury yields. Turnover was $166 million. At 0645 AEST on Wednesday, the September share price index futures contract was down 32 points at 5,374.