Australian shares have fallen significantly, tracking heavy losses on Wall Street as worries about higher interest rates and a potential recession in the United States hurt investor sentiment.
The ASX 200 dropped 1.4 per cent, to close at 6,668 points, with nearly every stock trading lower.
Gold miners were caught in a sell-off, including St Barbara (-7.1 per cent), Silver Lake Resources (-7.1 per cent) and Regis Resources (-5.2 per cent).
The worst performing stock was Johns Lyng Group (-14.8 per cent), after the company said its CEO had sold 4 million shares. Meanwhile, Capricorn Metals (-10.1 per cent), Block (-6.2 per cent) and Chalice Mining (-7.3 per cent) were also among the weakest performers.
Only a handful of stocks traded higher, including Fortescue Metals (+1.9 per cent), Sims (+2.2 per cent) and Rio Tinto (+0.9 per cent).
The Australian dollar fell as low as 63.23 US cents on Monday afternoon, its lowest level in two-and-half years.
Although it had climbed back to 63.3 US cents by 4:20pm AEDT, the local currency is still around its weakest level since late April 2020.
The weakness was largely because the US dollar index (which tracks the greenback against major currencies) had risen to its highest level in two decades, on increased safe-haven demand.
Since its peak of 76.6 US cents in April, the Australian dollar has slumped by more than 17 per cent.
Aussie dollar recovery expected in 2023
National Australia Bank predicts the local currency will mostly trade between 62.5 to 67.5 US cents for the rest of this year, before recovering towards 70 US cents by the middle of 2023.
"We are reluctant to call a peak in the US dollar, given a still hawkish Fed [US Federal Reserve] and rising risks of a global recession, and which we are not convinced is adequately priced into risk asset markets," NAB currency strategists Ray Attrill and Rodrigo Cattril wrote in a research note.
"This is an ongoing threat to the Australian dollar given its risk sensitive [and] pro-cyclical nature and high correlation to global growth."
They forecast the US dollar will weaken (and the Australian dollar will recover) once markets are confident the Fed has stopped lifting US interest rates — and provided the European economy recovers after a tough winter, and China relaxes its COVID-zero policy next year.
Meanwhile, AMP Capital's chief economist Shane Oliver believes the local currency is "likely to remain at risk of further falls in the short term as global uncertainties persist and as the RBA [Reserve Bank] remains a bit less hawkish than the Fed".
Last week, the RBA bucked the trend when it lifted the cash rate by a smaller-than-expected 0.25 percentage points, which briefly fuelled speculation that other central banks may also begin to slow their pace of rate hikes.
"However, a rising trend in the Australian dollar is likely over the medium term as commodity prices ultimately remain in a super cycle bull market," Dr Oliver added.
Wall Street sinks on rate hike bets
The 'risk off' mood was sparked by US job figures, released on Friday, which showed 263,000 roles were added to the American economy in September, and the unemployment rate had fallen to 3.5 per cent, near its lowest level in 50 years.
It suggests the US economy is still performing strongly, fuelling bets that its central bank, the Federal Reserve, will continue hiking interest aggressively to the point it may trigger an economic downturn.
This led to sharp losses for Wall Street's main indexes, the Dow Jones (-2.1 per cent), S&P 500 (-2.8 per cent), and Nasdaq Composite (-3.8 per cent).
There is a very high chance (more than 80 per cent) the US central bank will lift rates by an outsized 0.75 percentage points at its November next meeting, according to futures pricing.
It would also be the Fed's fourth rate hike of that magnitude, as it desperately tries to bring down inflation, which has risen to a 40-year high.
The European Central Bank (ECB) is also expected to lift rates by 0.75 percentage points, while the Bank of England is tipped to announce an increase of at least 1 percentage point (or 100 basis points) at its next meeting.
Higher inflation and oil prices
"We are in the midst of the largest and most synchronised tightening of global monetary policy in more than three decades," said Bruce Kasman, head of economic research at JPMorgan, who expects hikes of 0.75 basis points from all three of those central banks.
"The [US] September CPI [consumer price index] report should show a moderation in goods prices that is a likely harbinger of a broader slowing in core inflation.
"But the Fed will not be responsive to a whisper of inflation moderation as long as labour markets shout tightness."
Reuters-polled economists are expecting US headline consumer price inflation to slow down to 8.1 per cent, when the data is released on Thursday evening (AEDT).
However, the the core inflation measure is tipped to accelerate to 6.5 per cent, from 6.3 per cent.
Spot gold fell 0.4 per cent, to $US1,687.54 an ounce.
Oil prices are still near a five-week high, despite Brent crude futures slipping 0.8 per cent, to $US97.17 a barrel.
Last week, oil prices were boosted by the OPEC+ cartel (which includes Russia, Saudi Arabia and the world's biggest oil producing nations) deciding to cut oil production by 2 million barrels per day from November.
That works out to be roughly 2 per cent of the world's global oil output.
