2012-11-08 08:31:11Roosevelt

AU Dollar down as fiscal fears outweigh fresh hope

The Australian dollar is almost half a US cent lower as worries about the US economy overshadow the euphoria over the nation's election result.

The local unit is trading at $US1.0416, down from $US1.0463 yesterday.

An initial bout of optimism after Barack Obama's election win pushed the Australian dollar to an eight-week high of $US1.0482 last night.

However US stock markets opened lower as investors became pessimistic about America's budget and economic challenges.


BK Asset Management managing director Kathy Lien said the sharp US stocks selloff was why the Australian dollar had fallen.

"While Americans are excited about having President Obama for a second term, his policies are less business-friendly and would hurt the financial markets more than help it, due to the prospect of higher taxes," she said from New York.

"The president's first task will be to deal with the fiscal cliff and it won't be made any easier with Republicans continuing to control the House and Democrats controlling the Senate." The so-called fiscal cliff is the simultaneous expiry of tax and spending cuts due at the end of 2012, which could push the US back into recession.

Ms Lien said US stocks and the Australian dollar were also lower after European Central Bank president Mario Draghi said the region's economic slowdown has reached Germany.

"That is a big deal because we have an ECB meeting on Thursday, and that would mean we won't see any positive comments from the central bank," she said.

Ms Lien said the release of Australian employment figures for October today was likely to be overshadowed by the ECB meeting.

She said she expected the Australian dollar to trade in a range between 103.70 US cents and 104.20 cents.