Aussie bearish below 81 cents

The Australian dollar extended lower against the US dollar early on Tuesday. It carved out a fresh 4-1/2 year low of 0.8087.

The Aussie has lost almost 9 percent so far this year, weighed down by falling global commodity prices and sub-par economic growth at home.
The main contributor to aussie weakness has been this year’s 50 percent slide in the price of iron ore, Australia’s top export. The fall came at a time when mining investment was slowing sharply, while other parts of the economy remained stubbornly subdued.

Debt futures implied a one-in-four chance of a cut to the 2.5 percent cash rate at the next central bank policy review in February and were fully priced for a quarter point easing by May.

Australia is also a major gold producer and export and the weakness in gold prices is also impacting the AUD. Positioning still seems to be light in the precious metal and markets are expected to remain contained during the holiday period.

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