THE dollar is lower after the weakest US economic growth print in 26 years convinced traders the Reserve Bank of Australia will have to deliver a big rate cut.
At 12.00pm (AEDT), the Australian dollar was trading at $US0.6350/58, down 1.6 per cent from Friday's close of $US0.6454/58.
During the morning, the currency moved between an eight-week low of $US0.6341 and a high of $US0.6367.
The dollar opened at its weakest starting level since late November on Monday, and continued to struggle during the morning as the weakest US economic growth since 1982 turned traders off high-yielding currencies.
Official data showed US gross domestic product shrank by 3.8 per cent in the year to December.
Easy Forex senior dealer Francisco Solar said the weak US economic growth data contributed to the weakness in Asian equity markets, which in turn put pressure on the dollar.
"There does seem to be negative sentiment that crept back into the market on Friday night and we saw some reflection of that in Asia,'' Mr Solar said.
"There's still this doom and gloom hanging over the heads of market participants.''
With global growth fears rampant, financial markets are expecting the Reserve Bank (RBA) to slash interest rates by 100 basis points on Tuesday, which would take the cash rate to 45-year low of 3.25 per cent.
"That's why we've seen the Aussie subdued - markets are expecting the RBA will signal further rate cuts,'' Mr Solar said.
Foreign exchange markets overlooked Australian Bureau of Statistics data showing a 0.8 per cent fall in house prices during the December quarter, the third consecutive quarterly fall.
The dollar was expected to fall to $US0.6315 during afternoon trade as weak equity markets weighed on risk sentiment.
At 12.00pm, the Reserve Bank's trade weighted index was at 52.6, down from Friday's close of 53.2.
The Australian bond market was weaker at noon.
The yield on the Commonwealth Government March 2019 bond was at 4.160 per cent, up from Friday's close of 4.105 per cent, while the yield on the April 2012 bond was at 2.905 per cent, up marginally from 2.903 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract price was 95.850, down from Friday's close of 95.915, while the March three-year bond futures contract price was at 97.080, down from 97.090.
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