Australian Property Prices continue to rise

Australian Dollar Rate Outlook

MELBOURNE'S property spree looks set to continue despite the looming threat of an interest rate rise.

Economists tip the Reserve Bank of Australia board will make history when it meets tomorrow by increasing official rates for the third month running. A 0.25 percentage point increase would bring the cash rate to 3.75 per cent, adding $45 a month to repayments on the average Australian mortgage of $300,000. There were more than 1000 auctions at the weekend, and about 2500 more are scheduled in the three remaining weeks before Christmas. The flood of stock trimmed Melbourne's auction clearance rate from its recent levels of 80 per cent to 78 per cent. Results were still solid despite heavy rain yesterday morning.

"Nothing's dampening the market at the moment," said Hocking Stuart Richmond director Chris Murphy. Yesterday afternoon Mr Murphy sold a Victorian terrace in Cubitt St, Richmond, for $756,000 - well above the advertised selling range of between $620,000 and $680,000. "We've sold nine out of 10 in Richmond this weekend," Mr Murphy said. A rise in interest rates would do little to cool the red-hot market, he said.

If the RBA decides on an increase to 3.75 per cent the official cash rate would still be lower than it has been for the past 20 years, excluding the global financial crisis. "We're coming off such a low base I don't think it will make a difference," Mr Murphy said. "If anyone's got any cash left after the GFC they're out and about bidding."

Real Estate Institute of Victoria's Robert Larocca said a lift in interest rates would be unlikely to shift the market until next year.

"If you're in the market at the moment you're committed and unlikely to change your course," he said.

Would-be homebuyers were aware that interest rates are on the way up and were already pricing in further rate increases. He said rates couldn't remain at emergency lows indefinitely.

To read more please visit www.news.com.au

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Euros To Australian Dollars = 1.6440
Australian Dollars to US Dollars = 0.9150
Australian Dollars to New Zealand Dollars = 1.2770

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Australian Dollar Outlook is bright as RBA looks to Hike Interest Rates

Australian Dollar Rate Outlook

THE Reserve Bank of Australia says further interest rate rises are "most likely appropriate", but the pace at which its adjustments will be made remains open. The central bank on November 3 raised the cash interest rate by 25 basis points higher to 3.5 per cent, its second rate rise in as many months.

The minutes of its board meeting that day, released today, said that if economic conditions continued to evolve as expected, a further gradual adjustment in the cash rate would most likely be appropriate over time. "But the pace of that adjustment remained an open question," the minutes said.

The RBA said it was "conscious of balancing risks" when considering adjusting interest rates, as it noted improved consumer and business confidence, better employment data and less spare capacity in the economy.

"On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded," the minutes said.

"Also, the rising Australian Dollar exchange rate would constrain output and dampen inflationary pressure, and credit conditions for some borrowers remained quite difficult. "On the other hand, a lengthy period with interest rates at very low level carried its own risks, particularly once the threat of serious economic weakness had passed."

The bank had lowered interest rates to a 49-year low of three per cent earlier this year to deal with the threat of the global financial crisis. Rates stayed at that historically low level between April and October, when the bank raised rates by 0.25 per cent.

The minutes said that financial markets, while still volatile, were in better shape than they were six months ago, while debt and equity markets were providing easier, and less costly, access to funding. Better-than-expected labour force data for September, showing a drop in the unemployment rate and an up tick in total employment, was evidence that unemployment was more moderate than expected, the minutes said.

The local economy generated 40,600 new jobs in September, while the rate of unemployment dropped 0.1 per cent to 5.7 per cent in the month. Quarterly consumer price index data (CPI) released around that time also showed easing in the underlying rate of inflation.

"Given the the earlier period of lower demand growth and the moderation of labour costs, this trend decline in inflation was expected to continue over the coming year, with underlying and CPI inflation expected to be consistent with the target in 2010," the minutes said.

The central bank's stated aim is for inflation to be within a target of two to three per cent in the medium term. The minutes showed the bank took note of a raft of economic data pointing to improved economic conditions among Australia's trading partners.

"Asian economies were generally growing at quite solid rates, after having had sharp contractions in some cases. "The important consideration for the board was that, for the group of economies that comprise Australia's major trading partners, a broad range of forecasts were expecting growth to be around trend in 2010."

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Euros To Australian Dollars = 1.6633
Australian Dollars to US Dollars = 0.9298
Australian Dollars to New Zealand Dollars = 1.2457

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Australian Dollar Exchange Rate shoots up to 15-month high vs US Dollar

Australian Dollar Rate Outlook

The Australian dollar exchange rate shot up almost three quarters of a cent to a 15-month high immediately after the release of better-than-expected employment figures. At 12.00pm AEDT, the dollar was trading at $US0.9362/66, up from yesterday's close of $US0.9294/99. During the local session, the unit traded between $US0.9298 and $US0.9371, its highest point since August 2008.

Nomura chief economist Stephen Roberts said the Australian dollars strength came after the release of unemployment data. "Those figures were stronger than expected," Mr Roberts said.
"We've had back to back monthly increases now in employment, which has broken a bit of that sore tooth for the time being where employment was always alternating between a good month and a negative month in terms of change."

Australia's unemployment rate was a seasonally adjusted 5.8 per cent in October, compared with unrevised 5.7 per cent in September, the Australian Bureau of Statistics said today.

Total employment rose by 24,500 to 10.832 million in October, seasonally adjusted. Michael of Sydney Full-time employment rose by 2,900 to 7.591 million in the month and part-time employment was up by 21,500 to 3.241 million. The participation rate in October was 65.2 per cent, compared with 65.2 per cent in September.

The median market forecast was for total employment to have declined by 10,000 in October, an unemployment rate of 5.8 per cent and a participation rate of 65.2 per cent. Mr Roberts said Australia needed employment growth because the labour force was growing faster. "So without relatively firm employment growth, the unemployment rate just slightly drifts up," he said.

The Australian dollars performance was strong but it still had some way to go to reach the highs of US$0.9500 in August and US$0.9850 in July last year. "Today it's done a fair bit of work," he said. "This number has given it a boost for the time being."

Mr Roberts forecast the Australian dollar would trade around the US0.9370-80 mark and drop back before the close of domestic trade.

To read more please visit http://www.news.com.au/business/story/0,27753,26340135-31037,00.html

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Euros To Australian Dollars = 1.6060
Australian Dollars to US Dollars = 0.9295
Australian Dollars to New Zealand Dollars = 1.2625

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Positive Australian housing data overnight saw investors Buy Australian dollars

Australian Dollar Rate Outlook

The euro exchange rate remained strong against the dollar in early New York trading Monday, hovering around the psychologically important $1.50 mark, after rising global stocks suggested markets would shake off last week's disappointing U.S. jobs data and continue to load up on risk.

Finance ministers and central bankers at this weekend's meeting of the Group of 20 industrialized and developing nations didn't mention currencies in their official communique, removing what had been a possible obstacle to placing bets on higher-yielding currencies.

If U.S. stocks follow the lead of Asian and European exchanges, the euro and other higher-yielding currencies are likely to extend their gains against the best US dollar rate. U.S. stocks are expected to open higher.

In early morning trading, the euro was at $1.4991 from $1.4844 late Friday, according to EBS via CQG. The dollar was at Y89.95 from Y89.96, while the euro was at Y134.80 from Y133.53. The U.K. pound was at $1.6773 from $1.6608

The Dollar Index, a trade-weighted basket of six currencies, was at 75.109 from 75.784 late Friday. The index was flirting with nearly 15-month lows.

Positive Australian housing data overnight sent investors into the Australian dollar, which lifted other higher-yielding currencies. The Australian dollar hit a two-week high, at $0.9299, on the data that showed Australian housing-finance approvals rose 5.1% on the month in September, more than the 3% rise expected.

The continuing positive pace of Australia's economic rebound added to the view that the Reserve Bank of Australia may deliver more increases to its key interest rates in coming months, boosting investor sentiment for the Australian currency.

Australia's economic turnaround contrasts with the disappointing U.S. jobs data reported Friday, which showed unemployment rose above 10%, its highest level in nearly three decades.

The weekend's G-20 meeting in Scotland also proved uneventful for financial markets. The group didn't mention currencies at all in its final communique. Some analysts had expected exchange rates would be discussed.

More direction appeared to come from comments by U.S. Treasury Secretary Timothy Geithner and U.K. Prime Minister Gordon Brown, who warned against ending financial-crisis support programs prematurely. In other words, there won't be any rush to tighten monetary policy, which should continue to weigh on the low-yielding US dollar exchange rate.

There are no key U.S. data Monday, which means the euro exchange rate and other higher-yielding currencies should track the direction of the stock market.

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Pounds to Australian Dollars = 1.8013
Euros To Australian Dollars = 1.6633
Australian Dollars to US Dollars = 0.9298
Australian Dollars to New Zealand Dollars = 1.2457

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Australian Dollar set to rise as RBA hike australian mortgage rates again

Australian Dollar Rate Outlook

A CHORUS of business leaders, led by Aussie chairman John Symond, has pleaded with the Reserve Bank of Australia to take baby steps in its push to raise interest rates away from "emergency levels".

The RBA stands to cripple thousands of homeowners if it raises official Australian interest rates too rapidly, in increments of more than 0.25 per cent, or by lifting rates above five per cent within a year, the home loan tsar told business leaders in Sydney yesterday, The Daily Telegraph reports. The Reserve is expected to lift its cash rate by 0.25 per cent, to 3.5 per cent, today with economists now ruling out the previously predicted "shock and awe" 0.5 per cent hike.

Relatively flat inflation figures, combined with further instability on global sharemarkets, have even raised the slim prospect of rates remaining on hold. Despite the softening economic environment, with the Reserve regularly stating the need to quickly move rates towards more neutral levels of 5 per cent, economists are now banking that official interest rates will hit 4.25 per cent within six months. Mr Symond told the Australia-Israel Chamber of Commerce such a rise would hurt the vulnerable. "Hopefully Glenn Stevens follows through with only gradual increases," he said.

"That's all we need. Let's hope they don't follow through with increases as dramatic as they cut on the way down. "An increase of 1 per cent over time is not going to make much difference, but 2 per cent and from there on, there are going to be a lot of people lose their homes." His sentiments were backed up by the Australian Retail Association. Executive director Russell Zimmerman said retailers were calling for calm from the Reserve and a hold on rates till next year to allow the sprouts of economic recovery to bear some fruit. "Retailers are concerned that interest rate rises now could slow down the wheels of economic recovery that are just starting to turn. Retailers are looking for a bit more momentum before higher interest rates start to take cash away from consumers," he said. Although higher interest rates will hurt its business, Myer was left licking wounds of a different kind yesterday.

The department chain, fronted by fashion icon Jennifer Hawkins, relisted its shares on the Australian sharemarket on a day of heavy selling across the board. Myer's shareholders, which include Hawkins, saw their initial investment in the company drop a staggering 8.5 per cent in minutes. Meanwhile, billionaire property developer Harry Triguboff suggested that interest rates need not be on pause, but should be clipped further to levels in the UK and US.

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Euros To Australian Dollars = 1.6357
Australian Dollars to US Dollars = 0.9023
Australian Dollars to New Zealand Dollars = 1.2450

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