US DOLLAR WEAKER AGAINST THE AUSTRALIAN DOLLAR

Aussie dollar keeps climbing

towards 110 US cents

April 28, 2011 – 3:25PM

The Australian dollar has continued its record-breaking march towards the 110 US cent mark, charging through 109 US cents on its way to another post-float peak.

At the local close, the dollar was buying 109.09-14, after earlier touching 109.48 US cents, the highest level since February 1982, or almost two years before the dollar was floated.

The Australian dollar was also buying 89 yen, 73.5 euro cents and 65.3 pence.

The local currency had rocketed more than 2 US cents since noon yesterday because of renewed worries about the US dollar – which has sunk to its lowest in three years against a basket of currencies. The US Federal Reserve gave no indication overnight that it would raise its interest rate anytime soon.

Following the five-day Easter and Anzac Day weekend, the local unit resumed its recent rally after headline inflation figures for the March quarter came in at their highest since the June quarter of 2006.

Travelex head of dealing Bernie Tuck said the Aussie dollar was due for a pause following the flood of economic news in Australia and the US in the past 24 hours.

“The fundamental fact is that the Aussie is incredibly strong at the moment. The US dollar is weak across the board and there is no indication that the US is going to raise rates any time soon,’’ he said.

‘‘We’re effectively in uncharted territory. The rally upwards in the course of the last few sessions has been extraordinary.”

Mr Tuck said the Aussie has also been aided by a huge amount of so-called carry trade, or borrowing in low interest rate-linked currencies, such as the US dollar or Japanese yen, for investment in the local dollar which benefits from higher interest rates.

The Reserve Bank’s 4.75 per cent interest rate is the highest in the developed world, said Mr Tuck.

Westpac senior market strategist Imre Speizer said market optimism continued to encourage traders to invest in risk assets such as the Australian dollar.

“Risk appetite remains intact globally (and) the trend for the Australian dollar continues to be upwards,” he said from Auckland.

The US central bank’s Federal Open Market Committee (FOMC) ended its two day meeting early today, after which Fed chairman Ben Bernanke said the bank would complete its $US600 billion ($556.2 billion) economic stimulus plan in June as planned.

“The FOMC gave the Australian dollar a bit of a burst by keeping the status quo intact. There were no surprises at all, so the weak US dollar story remains, Mr Speizer said.

The Reserve Bank of Australia’s trade weighted index (TWI) was at 79.1, the highest since 1985, up from 78.7 on yesterday.

AAP, with Chris Zappone, BusinessDay

Sourced & published by Henry Sapiecha

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