Sharp Losses Continue for the Australian, New Zealand and Canadian Dollars

Next to the Japanese Yen crosses, the biggest losers were the Australian, New Zealand and Canadian dollars. More Australian hedge funds are being hit by the US subprime crisis. Basis Capital told investors today that one of its hedge funds have lost over 80 percent of its value. As of March, the fund had a $1 billion in holdings, which means that now they probably now have less than $200 million.

More skeletons will probably becoming out of the closet as the hedge funds in Australia prove to be up to their necks in risk. The New Zealand dollar is tracking the Australian dollar lower, having sold off aggressively for the past five trading days. The Canadian dollar also continued lower on the back of continued weakness in economic data. We could see a bounce in the CAD however after Coventree announced that they have found buyers for their asset backed commercial paper, which suggests that they may lift their funding freeze. The Bank of Canada also injected further liquidity to calm the markets.