AUD Rally R.I.P
The Australian dollar has closed lower, falling below $US0.6400 as weaker equity markets overshadowed a short-lived bounce from another big interest rate cut by the RBA. At the 5pm local close, the dollar was trading at $US0.6358, down 1.1 US cents, or 1.7%, from Monday’s close of $US0.6467. During the day, the local unit traded between a low of $US0.6337 and a high of $US0.6470. The local currency advanced about half a US cent shortly after the Reserve Bank slashed the cash rate by 100 basis points, or a full percentage point, to 4.25%.
“There were some in the market who were expecting a far more aggressive cut and had gone short on the Aussie dollar,” said Tony Morriss, senior currency strategist at ANZ.
But the rally was short-lived as attention quickly returned to weak Asian equity markets, which dampened appetite for high-yielding assets such as the Australian dollar. A senior currency strategist at financial markets research group Forecast, Lee Wai Tuck, said investors remained nervous after the poor finish on Wall Street.
“Market players are still conscious about the downside risks in stock markets,” Mr Lee said from Singapore.
The benchmark S&P/ASX200 index closed down 4.2%. It was a similarly bleak picture across Asia, with all the major bourses in the red. Mr Lee said the October retail sales and the September quarter current account deficit data had little effect on currency markets.
“Overall, the focus is still very much on equity markets,” Mr Lee said.
Heightened risk aversion was also reflected in the Australian dollar’s performance against the Japanese yen – the local currency was trading at 59.24 yen, down 3.8% from Monday’s close of 61.57 yen.
I expected the Australian dollar to remain under pressure during the overnight session. Take that in notice guys.
Post Details
Posted on December 3, 2008
at 11:21 am
Written / posted by: John
Filed under: Breaking News