Australian Dollar Outlook steady for 2011

THE Australian dollar has ended lower as investors dumped risk assets following a slump on Asian equity markets.

At 5pm australian dollar exchange rate was trading at 98.79 US cents, down from Friday's close of 99.00 cents. Shortly after, the local unit traded between 98.65 US cents and 98.90 cents. UBS interest rate strategist Matthew Johnson said the australian currency moved sideways during domestic trade. "The australian currency is trading in such a small range due to low levels of liquidity," Mr Johnson said.

He said there had been a slight move towards safe haven assets due to increased tensions on the Korean peninsula and falls in equities. The Australian share market finished the day weaker after sagging bank stocks outweighed gains to the energy sector.

The Australian bond market ended firmer after investors moving into safe haven assets as military tensions on the Korean peninsula increased.

The Australian dollar closed at 82.86 yen, down from 83.18 on Friday and at 75.07 euro cents from 74.56 previously. At 4.30pm AEDT on the ASX 24, the March 10-year bond futures contract was at 94.430 (implying a yield of 5.570 per cent), up from Friday's close of 94.365 (5.635 per cent). The March three-year bond futures contract was at 94.730 (5.270 per cent), up from 95.700 (4.300 per cent).

Mr Johnson said Australian bonds were relatively flat after a rally in US Treasuries. "Weaker equities have caused US Treasuries to rally and Australian bonds have followed suit," Mr Johnson said.

"The ten years have been stronger than the three years, given the offshore factors. There's a little more tension on the Korean peninsula, so there's been a move away from risk on the equity market."

Mr Johnson said bonds would continue to trade in a narrow range in the lead-up to Christmas. "At this time of the year you'd expect the thin trading volumes."

The 90-day bank bill closed at 4.980 per cent down from 5.020, while the 180-day bank bill closed at 5.170, down from 5.210.

At 4pm AEDT, the RBA's trade weighted index was unchanged from Friday's close of 74.8.

Read more: www.news.com.au

Pounds to Australian Dollars = 1.5700
Euros To Australian Dollars = 1.3300
Australian Dollars to US Dollars = 1.0000
Australian Dollars to New Zealand Dollars = 1.3300

Bye For Now

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Australian Interest rates will stay steady for at least another two months after the
Reserve Bank today kept the official rate on hold at 4.75 per cent. The decision
was widely expected after the RBA’s surprise move last month prompted the big
banks to lift mortgage rates well beyond the official 25 basis-point rise. HSBC
economist Paul Bloxham said last week that today’s decision was “almost a fait
accompli” after mortgage rates rose by about 40 basis-points in November, “which
is plenty of tightening for now”. After today’s board meeting, the RBA will not
meet again until February,

the Herald Sun reports.
In a statement detailing today's rate decision, RBA governor Glenn Stevens said there continued to be "a degree of caution" in consumer spending and borrowing, which has led to "a noticeable increase" in the household saving rate. "Following the board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average," Mr Stevens said. "The board views this setting of monetary policy as appropriate for the economic outlook."

A 25 basis point increase to the official rate would have added about $50 a month to a $300,000, 25-year home loan, according to research company Canstar Cannex. All 15 economists surveyed earlier by AAP forecasted the central bank would leave the overnight cash rate at 4.75 per cent. The meeting followed weak economic data last week showing the Australian economy grew 0.2 per cent in the September quarter for an annual pace of 2.7 per cent and retail trade fell 1.1
per cent in October. "The 'super-sizing' by the commercial banks all but liminated the need to do much more near term," JP Morgan chief economist Stephen Walters said yesterday. Last week's data also showed tepid economic growth in the September quarter and an unexpectedly weak result for October retail sales, giving the (RBA) more flexibility on its next move. The jump in
mortgage rates, aside from the uproar from customers and politicians of all stripes, has caused a change of behaviour among borrowers.

According to Mortgage Choice data, almost 11 per cent of all home loans approved in November were fixed rate, compared with 7.7 per cent in October, as borrowers sought certainty in their
monthly repayments. Such mortgages accounted for less than one per cent of approvals in January. Another broker, Loan Market, has also faced a flood of inquiries from people wanting to reduce their home loan by moving to a smaller house. Treasurer Wayne Swan is expected to announce a suite of measures this week to encourage more banking competition by promoting smaller banks, building societies and credit unions.

For the full story please visit www.news.com.au

Pounds to Australian Dollars = 1.5850
Euros To Australian Dollars = 1.3450
Australian Dollars to US Dollars = 1.0095
Australian Dollars to New Zealand Dollars = 1.3000

Bye For Now

IMS Foreign Exchange
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money Australian Dollars?

Contact IMS Foreign Exchange + 44 207 183 2790

Overseas Money Transfers