The AUD has opened this morning below USD0.9800 as market confidence and continued concerns of a global recession hit the markets hard.

Australia: The flight to safety during the offshore session saw falls across all markets, with commodity currencies the hardest hit. The AUD has plunged to a 10 month low against the Greenback, trading below USD0.9700 albeit briefly. It has since rebounded to open back above USD0.9750 this morning.

The local unit shed two and a half cents since its parity close yesterday. Australian shares are set to follow offshore leads with the Dow Jones posting its biggest two-day decline since December 2008, falling 3.5% to finish at 10734.

The worsening European debt crisis and fears of a US recession have erased almost $10 trillion off equity markets from May. The perfect storm started during yesterday's trading session; with comments from the US Federal Reserve sighting there are "significant downside risks" the previous night.

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Manufacturing data released in China yesterday also showed signs of slowing and was released below the expected 49.9. It is likely that the AUD will have some buying support at USD0.9700, but should it push through this level, then we could see the AUD retreat back towards USD0.9500.

Majors: Weaker than expected Eurozone PMI readings added to global market concerns overnight, with the problems coming out of the region set to continue. The market is now pricing in the likelihood that Greece will eventually default, especially since it has been made clear in recent times that Germany will not be saving the EUR all by itself.

The continued concern has seen investors flock to the USD with the EUR falling to an 8-month low against the 'safe haven' USD. Despite the poor data out of Europe, the markets also focused on the downbeat tone of the US FOMC statement from the previous trading session, with investors convinced that "Operation Twist" will not be effective in stimulating growth.

Heavy volumes signalled investors are anticipating more losses with the CBOE Volatility Index jumping 12%. Better than expected US Labour market and housing data was ignored. With the monetary policy makers from the world's 20 largest economies meeting in Washington this weekend for the annual meeting of the IMF and the World Bank, it is obvious that something needs to be done to stabilise the quivering markets.

Economic Calendar:
23 SEPT AU RBA's Financial Stability Review
CH MNI Flash Business Sentiment Survey SEPT
EU PMI Manufacturing SEPT

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