The Australian dollar has become the world’s second-worst performing major currency since the nuclear crisis that has hit Japan.
Against the US dollar, the Australian dollar lost about 4% to hit a four-month low earlier today after hovering around parity with the greenback for months.
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St. George chief economist Besa Deda predicts increasing concerns about Japan’s nuclear plants – which are already emitting radiation emissions as a result of explosions – could push the Australian dollar down to 92 US cents.
The retreat of the Australian dollar is predominantly driven by the rush of Japanese investors to redirect money back to Japan in anticipation of the mammoth rebuilding cost.
Despite dips in the dollar, signs of a recovery in global markets have propelled Australian shares back into the black after investors wiped $30 billion from the value of Australia’s biggest companies yesterday.
Shares plummeted as news spread of explosions at Japan’s Fukushima nuclear plant, sparking fears radiation emissions could reach Tokyo.
Several major companies including Ikea and H&M have offered to help their Japanese employees leave Tokyo and surrounding areas, and relocate further south in light of the news.
A spokesperson for Ikea, which employs around 2,000 people in Japan, says the company has offered to help some 1,200 employees and their families relocate 300km south of Tokyo to the Kansai region.
The spokesperson says the company has also offered to help its foreign workers leave the country.
Swedish fashion giant H&M, which employs around 900 people in Japan, has also offered to relocate its staff to a safer area after deciding to shut nine stores in Tokyo and neighbouring city Yokohama.
Tokyo residents have either fled the city or stocked up on face masks and emergency supplies as radiation fears escalate.
The death toll from the earthquake and tsunami already stands at more than 4,000 while 8,606 have been reported missing.
The possibility of mass evacuations from Tokyo have sparked speculation the Reserve Bank of Australia will cut interest rates, but business groups and political leaders say it’s still too early to assess the impact of the disaster on the Australian economy.
The latest economic data indicates Australia’s economy already faces hardship in the next six to 12 months due to the Queensland floods.
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity for the next three to nine months, fell 1.1% to 3.5% in January.
Westpac senior economist Matthew Hassan says the repercussions of Cyclone Yasi and the Japan earthquake will lead to more volatility in the coming months.
Professor Andrew O’Neil, director of the Asia Institute at Griffith University, says Japan’s crisis could lead to job losses in Australia, particularly in Queensland.
“I think of all [the] states in this country that could take a great hit from this, [it] is Queensland, as coal is its greatest export, as well as tourism,” O’Neil says.
As Japan is one of Australia’s major trading partners, Prime Minister Julia Gillard has not ruled out the possibility of government intervention to protect Australia from economic damage.