$A falls ahead of US Senate vote on China
The Australian dollar has fallen to a 10-month low as traders await an overnight vote in the US Senate on China’s alleged currency manipulation and on on-going worries about Europe.
The vote in the US senate centres on a bill which aims to raise duties on Chinese imports to punish the country for allegedly keeping its currency down. “
That could stir up a hornet’s nest between China and the United States and that will affect global growth and commodities,” stated Kurt Magnus, head of foreign exchange at Nomura.
US dollar strength and concerns about Europe’s sovereign debt crisis kept the Australian dollar weak, pushing it down to its lowest level since December 2010 of 95.92 US cents at 1510 (AEDT), Mr Magnus said.
At 1700 (AEDT), the Australian dollar was trading at 96.17 US cents, down from 97.23 cents on Friday.
Mr Magnus stated the general risk-off sentiment may continue to hurt the Australian dollar. “It’s the uncertainty that is driving equity markets (lower).
“If there is no confidence, it means there is no certainty.”
The Reserve Bank of Australia (RBA) is due to meet for its October board meeting and decision on the cash rate tomorrow.
All 15 economists surveyed by AAP state the RBA will keep the cash rate at 4.75 per cent tomorrow, and only two state there will be a move before the end of the year – one up and one down.
At 1700 AEST, the Australian dollar was at 74.13 Japanese yen, down from Friday’s close of 74.53 yen, and at 72.19 euro cents, up from 72.04 euro cents.
Meanwhile, Australian bonds followed US Treasuries to close firmer US bonds rose on Friday after German finance minister Wolfgang Schaeuble stated Germany would not contribute any more money to the beefed-up European bailout fund than what had already been approved by the nation’s parliament.
Australian bonds followed their US counterparts to strengthen today, stated David Plank, fixed income strategist at Deutsche Bank.
At 1630 (AEDT), the December 10-year bond futures contract was trading at 95.885 (implying a yield of 4.115 per cent), up from 95.760 (4.240 per cent) on Friday. The December three-year bond futures contract was at 96.470 (3.530 per cent), up from 96.390 (3.610 per cent).
Locally today, TD Securities and the Melbourne Institute released their inflation survey, which showed a 0.1 per cent rise in its inflation gauge for September.
In the year to September, the inflation gauge rose 2.8 per cent, compared with 2.9 per cent in August.
Both figures are at the upper end of the central bank’s two to three per cent inflation target band.
Mr Plank stated bond traders would likely be focused on US employment and ISM non-manufacturing data, due later in the week. “The market will also be watching whatever happens in Europe and the associated fall-out for equity markets.”
source : www.wabusinessnews.com.au
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Submited at Monday, October 3rd, 2011 at 10:00 pm on Business by madison
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