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Australian Dollar Down from 18-Year Highs Against U.S. Dollar

The Australian dollar retreated from fresh 18-year peaks against the U.S. dollar on Wednesday, dragged back by a bout of risk aversion among global investors and weaker commodity prices.

The Aussie eased to a near one-week low against the Japanese yen as risky carry trade positions were unwound amid a general upturn in investor risk aversion, stoked by the U.S. subprime mortgage market woes.

The Australian dollar was quoted at $0.8456/59 against the U.S. dollar, down from $0.8472/8476 here late on Tuesday. It struck a fresh 18-year high of $0.8512 in offshore trade.

On the crosses, the Aussie eased to 104.03/13 yen, well below a 16-year peak of 105.35 yen struck last Friday.

The low-yielding yen gained across the board amid nervousness that troubles in the U.S. subprime mortgage market could spill over to wider financial markets. U.S. equity markets closed down for the third session.

The Aussie was also weighed down by a fall in industrial metals prices which dropped on worries about a general economic slowdown. Australia is a big exporter of resources and has been riding a global commodities boom in recent years.

Analysts said any dips in the Aussie could prove to be short-lived especially since expectations are that domestic interest rates would go up before year-end.

Australia's cash rate is amongst the highest in the industrialized world at 6.25 percent but financial markets are pricing in a quarter percentage point rate hike in October.