From the end of 2008 through July, no major currency appreciated as much as Australiaâ€™s dollar, thanks to booming shipments of iron ore and other commodities to China. Since then, itâ€™s the worst performer as the engine of world growth slows.
The so-called Aussie depreciated 2.5 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Traders are betting Australiaâ€™s central bank will cut interest rates to boost growth, dragging down the currency even though the Standard & Poorâ€™s GSCI Index of commodities has risen almost 20 percent from its low this year in June.
This reversal shows the dangers for an economy tied too closely to another. China, which buys 28 percent of Australiaâ€™s exports, said industrial output grew at the slowest pace in three years last month as Europeâ€™s debt crisis cut sales of Chinese goods. Polls show Prime Minister Julia Gillardâ€™s governing Labor Party is under pressure before elections due next year.