Australia blames dollar plunge on Europe

SYDNEY, May 21, 2010 (AFP) - The steep plunge in the Australian dollar, which hit nine-month lows Friday, was due to global uncertainty not a proposed mining tax, the country's deputy prime minister said.

The Australian dollar was trading at 93.04 US cents at the end of last month and this week hit a low point of 80.73 US cents.

At the close of business Friday it had recovered from sharp losses early in the day to be at 82.73 US cents. However, the currency has fallen 11.1 percent for the month thus far.

Deputy Prime Minister Julia Gillard said the fall was related to the wave of uncertainty in Europe and the United States stemming from Greece's debt woes and not Australia's proposed 40 percent tax on the so-called super profits of the resources sector.

"The euro is falling dramatically," Julia Gillard told the Nine Network when asked whether the dollar's dive was related to the proposed tax on the country's most important export sector.

"We are seeing instability in Greece and what we know from the global financial crisis is when you get instability somewhere it feeds around the world.

"We are seeing a flight to the US currency. Whenever there are problems around the world people flow to the US dollar because it's viewed to be the world's strongest currency."

The Australian dollar, which in 2007 was close to reaching parity with the greenback before it was pulled down under the weight of the global financial crisis, has hit some of its lowest points since July 2009 in the past week.

Australia's economy is riding a commodities boom driven by Asia and the government's plans to tap into resources' companies profits has angered mining firms, which say it will drive investment offshore.

But Gillard said the government was committed to its controversial tax, although she did not rule out changes.

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