The Australian dollar has tumbled to a seven-year low as risk sentiment soured in the wake of plunging oil prices and Chinese stocks.

At 0700 AEDT on Monday, the local unit was trading at 68.43 US cents, down from 69.54 cents on Tuesday.

Stuart Ive, senior client adviser, OM Financial, said the Aussie underperformed most major currencies, slumping to its lowest level since April 2009 on Friday night.

Ive said another dramatic selloff on China’s sharemarket kicked off a fresh bout of global risk aversion.

The Shanghai Composite Index ended down 3.6 per cent on Friday.

“That was combined with the market focus on energy, with oil prices falling through $US30 a barrel again on (West Texas Intermediate) crude,” he said.

Ive said the pending announcement of a lift on all export sanctions for Iran triggered the slide.

“Iran over the weekend said they’re looking to increase production rapidly by half a million barrels per day,” he said.

“This adds to an already very bloated oil market.”

The Australian dollar couldn’t escape the pain as energy shares weighed on markets in the US, the Middle East and Europe.

Ive said the currency would start the week again on the back foot, with little market-moving local data and thin trading as the US observes a national holiday.

“The pressure remains to the downside, and we’ll be watching for China GDP and industrial production figures on Tuesday,” he said.

AAP

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