The Australian dollar is currently experiencing downward pressure as a result of heightened risk aversion in global financial markets. This shift in sentiment is primarily driven by ongoing concerns surrounding the US sub-prime mortgage market and the potential for broader economic repercussions.

Investors are becoming increasingly wary of assets perceived as higher risk, leading to a flight to safety. This often translates into selling pressure on currencies like the Australian dollar, which is typically viewed as a riskier asset compared to currencies like the US dollar or the Japanese yen.

The situation is further compounded by uncertainty regarding the future direction of global economic growth. If the sub-prime crisis triggers a significant slowdown in the US economy, it could have knock-on effects on other economies around the world, including Australia, a major trading partner with the US.

Factors contributing to the Australian dollar’s vulnerability include:

• Concerns about the US housing market
• Potential for a global economic slowdown
• Increased investor risk aversion

Market participants will be closely monitoring upcoming economic data releases and central bank policy announcements for further clues about the outlook for the Australian dollar and the global economy.