The Australian dollar is being sold off and stockmarkets remain skittish, despite the passage of the $US700 billion bail-out package for Wall Street and the US financial sector.
With the Reserve Bank board expected to cut interest rates for the second month in a row tomorrow, investors are growing wary of the risks to the local economy from falling commodities prices and the banking sector's reliance on overseas funding.
The dollar has dropped below US78c, shedding more than US4c in the past week. Equity markets are also expected to fall this week after a bout of selling on Wall Street on Friday.
The Dow Jones fell 1.5pc even as the House of Representatives passed the financial rescue package and President George Bush signed it into law.
Tomorrow's expected rate cut comes as the Reserve Bank moves to head off a slowdown in the economy.
Although official data indicates the jobs market remains healthy, private sector surveys of job advertisements have been pointing to a weaker labour market for the past six months.
"Organisations aren't laying off people in droves," said Robert Olivier, the director of the recruitment company Olivier Group.
"But while [there aren't] wholesale job losses, some organisations are quietly working their way through the ranks."
Job ads fell about 1pc last month, according to the Olivier Group's index, taking the year-on-year growth to a five-year low. Finance and IT have been hardest hit, with job ads down a respective 24pc and 19pc in the past year.
Paul Xiradis, chief executive of the funds manager Ausbil Dexia, said it was likely to be another choppy month for the equities market.
Resources stocks have come under pressure in the past fortnight, as commodity prices tail off.
For example, BHP Billiton has dropped 23pc in the past two weeks. Incitec Pivot, the fertiliser and explosives firm, has fallen 35pc.
But Mr Xiradis said resource companies would probably rein in investment on new projects because of the credit crisis and difficulties in obtaining funding. This would help put a floor under falling commodity prices.
"While demand might be falling, supply will be coming back even more sharply, which will be a supportive element for resources," Mr Xiradis said.
The drop in commodity prices has contributed to the fall in the dollar, which in July was almost at parity with the greenback. In addition, concerns about the country's balance of payments deficit - and its reliance on external borrowing - have intensified as credit conditions have continued to tighten.
A cut of at least 0.25 percentage points is considered a certainty following the Reserve Bank board's meeting. Many economists believe the cash rate will be cut by 0.50 percentage points, according to a Bloomberg survey. If so, this would lower the cash rate to 6.5pc, where it was before the rate rise last November.
There are also expectations of a global round of rate cuts.
The US Federal Reserve is under pressure to lower rates after a report on Friday showed the US economy shed 159,000 jobs last month, the largest drop since May 2003.
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