The Australian dollar has fallen to its lowest level in two years on the back of the Federal Reserve cutting interest rates in the United States, and the local sharemarket has also gone backwards.By midday today, the Aussie was buying about 62 cents against the greenback – the lowest exchange rate since October 2022.It also dipped below the 50 pence mark against the UK pound for the first time since the onset of the pandemic.
Australia's dollar and sharemarket have both slumped. (Peter Braig)The local sharemarket wasn't spared from the damage either, with the ASX200 falling 1.7 per cent by midday, down to its lowest level since the first week of November.The weak performances were sparked by the US Federal Reserve's decision to cut interest rates by 0.25 per cent, its third cut of the year.But the US central bank also forecasted it would likely only reduce the cash rate twice next year instead of its previous estimate of four cuts."I think that a slower pace of (rate) cuts really reflects both the higher inflation readings we've had this year and the expectations that inflation will be higher" in 2025, Federal Reserve Chair Jerome Powell said."We're closer to the neutral rate, which is another reason to be cautious about further moves."That sent stocks on Wall Street plunging on what ended up being the US market's worst day in four months.The Dow Jones Industrial Average closed down more than 1100 points, roughly 2.5 per cent, and the Nasdaq composite was hit even worse: it sank by about 3.5 per cent Wednesday.Those tremors were felt by Australian investors, with the ASX's slight drop yesterday followed by a far more substantial fall.But there was one sliver of good news for the Aussie dollar, as it rose sharply against the Kiwi dollar, which was hit hard by the news that New Zealand had fallen into a deep recession as GDP crashed by 1 per cent for the September quarter.
