Australian dollar drops to 5.5-year low after ECB move

The Australian dollar on Friday fell below 80 US cents for the first time since July 2009, as the US dollar rallied worldwide after the European Central Bank announced a huge bond-buying stimulus program. The Australian dollar dipped to 79.95 US cents, a five-and-a-half-year low, before returning to trade just above 80 US cents early Friday. Analysts said the weakening currency was also a reflection of softening commodity prices and rising expectations that Australia's central bank could further ease interest rates from a record low, following the ECB's quantitative easing operation and the Bank of Canada's unexpected rate cut Wednesday. "In the absence of any (Reserve Bank of Australia) guidance, the markets are looking offshore for direction," Westpac's senior currency strategist Sean Callow told AFP. "What they are seeing is looser policy from Canada, Europe, the Bank of England switching from two (policy makers calling) for a hike to nobody (calling) for a hike, and super-low inflation in New Zealand causing the market to think about a rate cut less than a year after they completed 100 points of hikes. "In that environment, people are asking: why should the RBA hold steady?" he said. Australia is exiting from an unprecedented mining investment boom that has helped the economy avoid recession for more than two decades. The transition towards non-resources led growth has been uneven, with the central bank cutting the cash rate to an all-time low of 2.5 percent to boost industries outside the mining sector. Economists are expecting plunging oil prices to weaken the cost of petrol and support a low inflation reading when official data on fourth-quarter consumer prices is released on Wednesday, giving the RBA room to cut rates further. The central bank meets for the first time this year on February 3.