Aussie dollar hits another record – SMH

Posted on April 20, 2011 by

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The Australian dollar has hit a fresh post-float high, following healthy local terms of trade figures released during Wednesday morning.

At 1pm (AEST) today, the local unit hit 105.96 US cents, its highest level since it was floated in December 1983.

Today’s record adds to a series of recent, record-setting peaks which have kept the Australian dollar consistently trading well above parity, with some analysts predicting it could go as high as 110 US cents by the end of the year.

Westpac senior currency strategist Sean Callow said the Aussie has been driven higher by a number of factors.

“One is broad US dollar weakness as bouncing Asian equity markets testify to the recovery in risk appetite from Monday night’s S&P ratings warning for the US.”

He said another factor is that assistant treasurer Bill Shorten announced today that the government is considering a tax break on passive investments from sovereign bodies, citing a Dow Jones report.

“It caused some head-scratching, since Australia is already seen as very attractive to foreign investors and such a move would only boost Australian dollar while cutting tax revenue,” he said.

The Australian Bureau of Statistics (ABS) reported that its import price index had risen 1.4 per cent in the March quarter, while its index for export prices climbed 5.2 per cent.

‘‘Obviously, the terms of trade story is one of the fundamental stories for the Australian economic outlook,’’ St George chief economist Besa Deda said. The terms of trade measures the ratio of export prices to import prices.

The ABS tomorrow releases its producer price index (PPI) for the March quarter, which is followed by the consumer price index (CPI), due next Wednesday. Ms Deda did not expect the Australian dollar to move greatly, in response to the PPI figures, unless it was an unusually large number.

The focus overnight will shift to the UK, where its central bank is due to releases minutes for its monetary policy committee meeting, she said.

‘‘Obviously, the market is preparing for the Bank of England to start raising rates soon, so they might actually get more attention than normal.’’

Ms Deda expected the domestic currency to trade between 104.80 US cents and 105.95 US cents for the remainder of the local session.

Meanwhile, the local bond market was softer at noon. At 1200 (AEST), the June 10-year bond futures contract was trading at 94.470 (implying a yield of 5.530 per cent), down from 94.495 (5.505 per cent) on Tuesday.

The June three-year bond futures contract fell to 94.890 (5.110 per cent), down from 94.920 (5.080 per cent).

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Posted in: APAC, USA