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Dollar slumps

Australian Cash Money With Five, Ten, Twenty, Fifty And One Hundred Dollar Notes.

The Australian dollar has extended its losses as shockingly weak inflation figures reverberate around global markets.

At 0700 AEST on Thursday, the local unit was trading at 75.82 US cents, down from 76.11 cents on Wednesday.

The currency is still reeling from a surprise slump in consumer prices which raised the chances of a budget day interest rate cut to the lowest level ever recorded.

Meanwhile, the Federal Reserve has kept its interest rates unchanged but has signalled confidence in the US economic outlook, leaving the door open to a rise in June.

As a result, the Aussie has suffered its largest one-day loss in eight months, BK Asset Management managing director of FX strategy Kathy Lien says.

“Between the hawkishness of the Fed and last night’s disastrous inflation report, [the Australian dollar] was also the day’s worst performing currency,” she said.

Lien said the benign inflation print sparked concern the Reserve Bank would cut the cash rate to 1.75 per cent next Tuesday, just hours before Treasurer Scott Morrison delivers his first budget.

“The speculation of easing is likely to grow further ahead of the meeting, leading to ongoing weakness in the currency,” she said.

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