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

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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

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THE Australian dollar has reached another post-float 28-year high against the US dollar.

The dollar exchange rate reached its record high of 100.57 US cents in early trade today, another post-float 28-year high.

Australia's push above parity with the US dollar rate will have a mixed impact on the economy, Prime Minister Julia Gillard said.

"This is a mixed thing. It's good for some industries and bad for others,'' Ms Gillard said on the Nine Network.

"If you rely on imported components to do what you do, then it makes a good difference. But if you're competing for things like tourism, international education, it makes it really tough."

Buy US dollar slid overnight, briefly touching a nine-month low against the best euro exchange rate, after the Federal Reserve said it would spend US$601 billion to buy US government bonds in an effort to boost the economy.

Investors had expected the Fed's action for months, since Ben Bernanke, the central bank's head, hinted at the move in a speech in late August.

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

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Australian Dollar Outlook

THE Australian dollar exchange rate is expected to stay above 90 US cents throughout 2011 as the Reserve Bank continues to raise interest rates.

Australia's resource sector is also tipped to prop up the domestic economy, replacing stimulus spending as a key driver of growth.

The "high-flying" Australian dollar should stay well supported for a while longer, Access Economics said in its latest Business Outlook report.

The forecaster's director Chris Richardson said he envisaged the Australian dollar rate staying above 90 US cents throughout 2011, but not going much beyond parity.

"We face roughly a year with the dollar being strong," he told AAP.

The Reserve Bank is also tipped to keep raising interest rates next year as wage costs put pressure on inflation.

"Australia's economy continues to dance to the beat of a different drum, and continuing good economic news and the coming inflection in inflation are likely to see the Reserve Bank raising rates again," the report said.

The cash rate was tipped to climb from 4.5 per cent at present to 6 per cent by the end of 2011, with the central bank tipped to raise the cash rate at least once before Christmas.

The report said business investment in the resources sector would be "absolutely vital" to Australia's economic recovery, replacing public stimulus spending as a growth driver.

"We need to see the likes of the Gorgon project and other resource spending take the baton of growth from the construction of school halls," it said.

This would offset sluggishness in the retail and housing construction sectors, the report said.

By the end of next year, Australia's terms of trade was expected to fall as a greater global supply of resources caused commodity prices to "return to earth".

The central banks of other advanced nations, including the US, would also start to lift interest rates.

This would diminish Australia's interest rate differential with other advanced economies and see the local currency fall off its highs, Mr Richardson said.

When it came to politics, Access Economics had misgivings about a minority government offering "a bucket of bribes" to the regions and promoting populist economic policies.

"They're not going to risk political capital going for the right thing," Mr Richardson said.

He cited shadow treasurer Joe Hockey's call to regulate bank interest rates as an example of irresponsible politics, and urged the government to refrain from erecting new trade barriers, subsidising old industries and reaching for regulation without checking if its costs outweighed benefits.

"And don't chase the chimera of 'supporting jobs' in an economy that is already close to full employment," Access said.

Access Economics is expecting consumer price index data for the September quarter to show an annual growth of 2.9 per cent and a quarterly pace of 0.75 per cent, when the figures are released tomorrow.

To Read more please visit

www.news.com.au

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Australian dollar's impact on company profits

THE Australian dollar's impact on company profits should be a mixed bag this reporting season.

On one hand, a more than US Dollar 8c decline against the greenback after the dollar punched above US94c in November would have come as a welcome relief to businesses with big US exposures, The Australian reported.

"If anything, that is going to provide a modest boost to earnings," said UBS chief strategist David Cassidy.

But its stellar march forward against the euro is likely to have dented the profitability of companies with operations in Europe. "For companies with big euro rate exposure, that is going to be a pretty clear headwind," Mr Cassidy said.

Last financial year was a roller-coaster 12 months for the Aussie Dollar. After breaking through US94c in November, it was sold down heavily in May to a low of US80.65c, as concerns over Europe's debt crisis intensified.

Fat Prophets analyst Colin Whitehead said the dip would have benefited exporters such as Foster's, which would have been able to compete more effectively on price. "Then you have the broader macro effect of tourism - during periods of Australian dollar weakness the tourism industry will benefit from more overseas visitors."

By the end of the financial year, the Australian dollar Rate had recovered more than 6 per cent to end the year at US85.53c, limiting its effect on local groups with US operations.

RBS equities strategist Greg Goodsell said he would be surprised if the dollar, against the greenback, was a big factor this reporting season.

"In the last 12 months it has averaged between US78c and US92c, so it has been in a reasonable range, whereas during the GFC it went down to the low 60s," he said.

He said Australian stocks generally did not take naked currency risk any more. "Most of them manage their exposures pretty well - they either put financial hedges in place if they have a significant degree of risk or do natural hedging, so if they have US dollar assets they will typically fund themselves in US dollars," Mr Goodsell said.

"Because of that, the currency has to move a long way to have a big impact on earnings results."

But Mr Cassidy said there could be some euro-related downgrades to watch for due to the dollar's strength against the euro exchange rate.

Last financial year, the dollar surged about 20 per cent against the euro, reflecting the differing outlooks for the Australian and euro-zone economies. "Obviously there are lots of moving parts as to how the business is actually going operationally, but companies like Amcor and Brambles do have big European operations," Mr Cassidy said.

To Read more please visit

www.news.com.au

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Australia does not have a speculative housing bubble

THE Reserve Bank has warned lenders and borrowers to be prudent while giving an assurance that Australia does not have a speculative housing bubble on its hands.

Fears of a property bubble emerged after the Australian Bureau of Statistics house price index rose 20 per cent in the year to March.

But RBA head of financial stability Luci Ellis said Australian house prices have recovered their small decline from 2008 to post increases of between about 12 to 15 per cent over the past year in capital cities, depending on the measure.

Ms Ellis said recent data suggested Australia does "not have a credit-fuelled speculative boom on our hands".

"It would not be desirable for the current situation to turn into one," she said in a speech.

"It will therefore be important for lenders to remain prudent in their standards.

"It will be equally important for prospective borrowers to have realistic expectations, and not to rely on a hoped-for capital gain in order to service their debts."

She told a residential property conference housing prices have been under upward pressure in Australia, with most short-term drivers coming from the demand side following the increased first home-buyers grant, low interest rates and lower than expected unemployment.

"The nature of the demand shock Australia faces means that it would be helpful if more of that demand could be accommodated with extra homes for occupation, instead of by higher prices," she said.

"Some of that pick-up in construction does seem to be happening."

She said the supply of housing was always going to be quite "sluggish".

"But whatever the causes, the ability to add to supply is falling short of this higher rate of population growth, despite some pick-up recently," she said.

"Naturally that is putting upward pressure on housing prices."

Ms Ellis said it would be "desirable" for the supply of new dwellings to become more flexible than it had been to date because extra people need somewhere to live, and both house prices and rents could rise.

The more that housing prices rise, the more some people might feel they must stretch their finances to buy a home, she said.

Another concern was that if too much of the response to faster population growth comes as faster growth in housing prices, this could be "built into people's expectations".

"If price expectations become over-optimistic and encourage too much investor demand, the result could be disappointment, or worse," she said.

She also said fewer households had bought their homes without debt.

Across the mortgage market, lending standards were now a little tighter than they were a few years ago and the fraction of low documentation loans was now lower than it was two years ago for both owner occupiers and investors, she said.

As well, only a minority of recent home loan borrowers started with a loan to value ratio above 90 per cent, she said.

Ms Ellis also revealed the RBA has been carefully watching lending standards in the important first-home buyer market segment.

"First-home buyers have long faced greater risk than more established home owners who have more equity in their home," she said.

"But as far as the data allow us to tell, recent new loans to first-home buyers look quite like those made to previous cohorts of first-home buyers."

To Read more please visit

www.news.com.au

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Australian Dollar will continue to strengthen against the euro and the pound.

Parity talk time again for the Aussie

Almost two years since the Australian dollar touched generation-high levels against the
US dollar rate at almost 98 US cents, debate over whether and when the Aussie dollar will exceed the greenback in value is back.

The Reserve Bank's move this week to raise its cash rate again sparked fresh impetus to the Aussie dollar's rise. The central bank's signal that more rate rises are ahead also added to the currency's relative allure.

And economists are dusting off the history books to assess the currency's rise against other
currencies, particularly those in Europe. The Aussie dollar remains at record levels versus the euro, where it's trading just below 70 euro cents, while it hasn't bought this many UK pence (currently about 61) in 25 years.

AMP Investor chief economist Shane Oliver believes the relative strength of Australia's resource-based economy will push the Aussie dollar, currently buying 92.9 US cents, to parity against the greenback before the year is out.

Indeed, Mr Oliver says the local dollar's recent rise is bringing it back into line with its longer-term averages. While it's traded at less than par with the US dollar since its float in 1983, Australia's dollar had been worth more than the greenback for the great bulk of the country's history, particularly during the era before the switch to a decimal currency in 1966.

''Back in 1901 the equivalent of one Australian dollar bought $US2.40 and for most of the last century the Australian dollar was above parity against the US dollar,'' Mr Oliver said, in a note to clients.

''It is likely the sub-parity period from the 1980s was the aberration for the Australian dollar and the improvement in Australia's relative fundamentals suggest it is likely the Australian dollar is going back above parity against the US dollar.''

The Aussie has risen 1.5 per cent in the past month alone against the US dollar, or 3.6 per cent since the beginning of the year, making it among the top five performers among major currencies during the period, according to Bloomberg data.

RBA outlook

Bolstering the local dollar's recent rise has been the Reserve Bank's series of five interest rate rises since October to 4.25 per cent. With the US Federal Reserve's lending rate remaining near zero, the gap between the two interest rates is the widest since 2008.

That gap may widen further, with financial markets betting on another four RBA interest rate rises over the coming year to prevent the economy expanding too fast. The unemployment rate now sits at 5.3 per cent, and may drop below 5 per cent before the end of 2010 - about half the current jobless rate in the US.

To be sure, at less than 93 US cents, the currency still has a fair way to go before parity is reached. Even so, NAB expects the Aussie dollar to trade at parity levels in the second and third quarters of this year, while overseas banks Nomura and Standard Chartered Bank are among those predicting parity by the final quarter of 2010. ANZ economist Amber Rabinov, though, forecasts the Australia dollar's rise will stall in the mid-90 US cent levels as worries resurface about the health of the global economic recovery.

''The continued depreciation of the euro versus the US dollar due to a lagging Euro zone recovery and sovereign credit concerns should cap gains in the Australian dollar,'' Ms Rabinov said.

Nonetheless, she said the Australian Dollar will continue to strengthen against the euro
and the pound. Other analysts are more pessimistic, though, seeing the Australian dollar
retreating over the year as investors grew skittish again about risk as troubles re-emerge in Europe, the US, and China.''I'm more a believer that the Aussie will end the year closer to 80 US cents rather than parity,'' said Arab Bank Australia Treasury Dealer David Scutt.

''We are only an economy of 22 million people and completely reliant upon the happenings offshore, a fact that many people have forgotten since the recovery process began.''

Mr Scutt said some countries, particularly in Europe, will struggle to meet their debt repayments, sapping the global appetite for currencies deemed to be relatively risky, such as the Australian dollar.

To Read more please visit

www.smh.com.au

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Australian Dollar Outlook improves as RBA leave Australian Interest Rates Unchanged

Australian Dollar Rate Outlook

THE Reserve Bank of Australia left the interest rates unchanged in February so it could assess the impact of earlier rate rises from both itself and the big banks on the domestic economy. The central bank board surprised financial markets by leaving the overnight cash rate steady at 3.75 per cent earlier this month.

"In considering the level of interest rates, members noted that the three increases in the cash rate late in 2009, together with the widening in the margins between the cash rate and many lending rates, had meant a material adjustment to the stance of monetary policy," minutes from the board meeting released today said.

"Members judged that monetary conditions were no longer exceptionally accommodative, though the structure of interest rates was still somewhat below average." The RBA had lifted the cash rate by 25 basis points at each of its meetings in October, November and December to its current 3.75 per cent.

The board noted the decision to leave the cash rate unchanged was "finely balanced" - as it also was at the December meeting - but its members expected further rate increases if the economy continued to improve as predicted.

"But they did not regard that outlook as requiring an increase at every meeting, and they saw the earlier moves to begin withdrawing monetary stimulus promptly as affording the board a degree of flexibility in its subsequent decisions," it said.

"This allowed the possibility of waiting to receive some more information on how the economy was responding to the monetary tightening that had already occurred.

"Such a course would also allow time to monitor events overseas."

The bank said most market participants had expected the cash rate to rise this month, but board members had decided the "stronger case" was to leave the cash rate unchanged.
Market economists had widely expected a quarter of a percentage point rise to 4.0 per cent on February 2.

"This decision would be accompanied by communication that, if economic conditions evolved broadly as expected, further adjustments to policy would probably be needed over time to ensure that inflation remained consistent with the target over the medium term," the minutes said.

The RBA uses monetary policy, or interest rates, to keep inflation within a target range of two to three per cent over the economic cycle. Headline consumer price inflation (CPI) was 0.5 per cent in the December quarter for an annual rate of 2.1 per cent, recent official data show.
Underlying inflation, the RBA's preferred measures as it removes volatile items, was 0.6 per cent in the December quarter, while the annual rate was 3.4 per cent - still above the bank's target range.

"Members noted that the forecasts were for further declines in the year-ended rate of underlying inflation, though the expected trough in inflation had been revised up slightly," the RBA said.

In its quarterly statement on monetary policy released on February 5, the RBA forecast underlying inflation to fall within its inflation target in the first half of 2010.

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

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Commonwealth enjoys massive windfall as it declines to lift deposit rates

Australian Dollar Rate Outlook

FIRST it was home buyers getting slugged - now it's those of us lucky to have a few Australian dollars to tuck away in a deposit account.

A decision by Commonwealth Bank bosses to keep rates low has delivered a massive windfall - a $2.94 billion half-year profit.

While its competitors were quick to lift deposit rates in a bid to attract customers, the CBA maintained ultra-low rates until the final weeks of the first half of 2009-10. "If you're a CBA shareholder you'd be delighted with the result, but if you're a CBA customer you'd have to be asking yourself if they're providing you with the best possible service," said Choice spokesman Christopher Zinn.

He said savers should shop around: "The banks are fully cognisant that a lot of people just roll over and don't move to take better rates." Figures released by the CBA showed its docile depositors did not move their money into better-paying accounts at rival banks. CBA chief executive Ralph Norris was coy when asked about the windfall reaped from lazy depositors. Asked about the stickiness of so-called "dumb money", Mr Norris said: "There is a proportion of our funds which is less rate-sensitive. that gives us an advantage."

Mr Norris indicated, however, that the bank would soon move to make its transaction and online saver accounts more competitive. CBA, Australia's largest bank, paid a measly average of 2.73 per cent on the $78 billion in its term deposit accounts, almost half what it paid a year ago.
Its plethora of transaction account holders only received a yield of 1.32 per cent on a total of $69 billion, again about half the average rate paid 12 months ago.

The Commonwealth Bank's half-year accounts also show it has been relatively kind to its home loan customers, despite instances of the bank lifting its standard variable rate higher than the Reserve Bank's cash-rate increases.

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

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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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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."

To read more please visit Wall Street Journal

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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

Pounds to Australian Dollars = 1.7820
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.

To read more please visit Wall Street Journal

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.

Pounds to Australian Dollars = 1.8157
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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Australian Property Prices set to rise even with stronger Australian Dollar

Australian Dollar Rate Outlook

TASMANIA'S Clarence City is Australia’s best property bargain according to a list of the country’s 100 hottest suburbs. Investors can pick up an average house in Clarence City suburbs of Clarendon Vale and Rokeby to Hobart's east for just $178,000, according to a report in Australian Property Investor magazine.

It’s a "long-term hold" but the area will see significant growth in five to seven years, the report says. The magazine asked Australia’s top property experts to list the hottest 100 suburbs poised for "strong capital growth" over the next 12 months.

With an average median house price of $548,000 across the 100 locations, news.com.au identified the cheapest of those suburbs and they are listed below. You can read the full list in the magazine, which is out today. Also released today, the Australian Property Monitors quarterly house price series showed house price growth of 3.7 per cent over the September quarter.

"Moderate to strong growth is expected across the market as a whole for the remainder of 2009 and 2010," APM's Matthew Bell said. "The question as to whether this growth can be sustained throughout 2010 depends on how quickly mortgage rates rise in the next six months," Mr Bell said.

Hottest suburbs with the lowest average house price

Queensland
Gympie $260,000
Ipswich $269,000
Kingaroy $270,000
Beaudesert $311,000

New South Wales
Gunnedah $208,000
Branxton $349,000
Granville $353,000
Shoalhaven $388,000

Victoria
Portland $189,000
Redan $194,000
Hastings $270,000
Frankston $300,000

WA
Geraldton $345,000
Thornlie $363,000
Bassendean $415,000
Hamilton Hill $430,000

Tasmania
Clarence City $178,000
Lutana $282,000
Mount Nelson $420,000
Hobart $425,000

NT
Rapid Creek $568,000

South Australia
Ceduna $245,000
Glanville $249,000
O'Sullivan Beach $261,000
Christies Beach $301,000

ACT
Gungahlin $458,000

Pounds to Australian Dollars = 1.8218
Euros To Australian Dollars = 1.6294
Australian Dollars to US Dollars = 0.9037
Australian Dollars to New Zealand Dollars = 1.2450

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Best buy Australian Dollar as the exchange rate looks towards Parity

Australian Dollar Rate Outlook

The Australian dollar was once again a top performer to finish the week’s trade as speculators poured into the progressively higher-yielding Aussie currency. Hawkish rhetoric by Reserve Bank of Australia Governor Glenn Stevens underlined the bank’s resolve to tighten monetary policy sooner than later. Indeed, Overnight Index Swaps are now pricing in an impressive 200+ points of rate hikes in the coming 12 months-by far the most of any G7 central bank. All else remaining equal, this should provide solid Australian Dollar support against lower-yielding counterparts. Yet the pace of Australian Dollar appreciation has been nothing short of impressive, and one has to wonder whether the currency can continue its recent advances. An effectively empty economic calendar gives little in the way of foreseeable event risk in the week ahead, and as such it remains most important to watch for major moves in key asset classes.

A speech by RBA Governor Glenn Stevens set the tone for what may be an aggressive wave of monetary policy tightening. Stevens discusses monetary stimulus in light of the global financial crisis, emphasizing that Australia seems to have weathered the broader economic crisis and escaped relatively unharmed. Economic resilience suggests that previously aggressive interest rate cuts have done their job, and in fact the central bank has already begun reversing its monetary policy accommodation. In its recent rate hike the RBA stated that rate hikes should "gradually" be pulled back.

Yet Stevens surprised many when he effectively foreshadowed rate hikes with similar intensity to the large cuts we saw through the financial crisis. He clarifies that he does not believe that the Australian economy is currently "too strong", but he does go on to say "that the very low interest rate settings were designed for a weaker economy than we are in fact facing." Interest rate expectations jumped on the commentary, and in fact markets are now pricing in a 50 percent chance of an aggressive 50 basis point (0.50 percent) rate increase through the November meeting.

Expectations are running high for Australian Dollar yields and the currency itself. The key question in the weeks and months ahead will be whether reality can match those lofty expectations. As it stands, a number of respected research desks have called for Australian Dollar parity against the US Dollar rate in the coming months. Yet near record-high Aussie correlations to key commodity prices suggest that AUD forecasts may depend on broader moves in key financial asset classes. Suffice it to say, there should be no shortage of excitement in upcoming Australian Dollar trade.

or the full story visit www.dailyfx.com

Pounds to Australian Dollars = 1.7679
Euros To Australian Dollars = 1.6162
Australian Dollars to US Dollars = 0.9257
Australian Dollars to New Zealand Dollars = 1.2295

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Australian dollar could soon be worth 1.100 US Dollars

Australian Dollar Rate Outlook

THE Australian dollar appears headed towards parity with the US dollar after Reserve Bank governor Glenn Stevens agreed the economy's strength could drive it"way up" to $US1.10.
The dollar jumped after Mr Stevens also suggested that the Reserve Bank would not be “too timid” in further increasing the official interest rate, breaking through US92c to reach 14-month highs. His comments startled foreign exchange market analysts and encouraged money markets to bet that the Reserve would lift its cash rate from 3.25 per cent to at least 3.75 per cent before Christmas and keep lifting next year, The Australian reports.“I tend to agree with him,” the Commonwealth Bank’s chief currency strategist, Richard Grace, said of Mr Stevens’s Aussie dollar bullishness.

But while Mr Stevens suggested the dollar’s rise was the result of Australia’s economic vigour, Wayne Swan warned that it would hurt farmers and other export industries. “I do understand some people will do it really tough as a consequence of a higher AUD rate ,” the Treasurer said. Since October 2, just before the Reserve Bank lifted its 3 per cent “emergency” cash rate, the dollar has gained nearly 7 per cent, from US86c to US92.11c in European trading last night. The dollar’s rise could further increase the tension between the Reserve Bank’s rate rise move and the Rudd government’s rejection of calls to unwind its budget stimulus more quickly. In theory, an expansionary budget policy pushes up an economy’s exchange rate.

The Reserve Bank is not intervening in foreign exchange markets to dampen the currency’s ascent, which is akin to a policy tightening that mostly hits exporters and businesses that compete against imports. But it also contains inflation by making imports cheaper. The Australian sharemarket rose again yesterday on the back of improved investor confidence in the Australian and global economies, with the All Ordinaries index gaining 28.5 points or 0.59 per cent to hit a one-year high.

Mr Stevens was asked at a breakfast function in Perth whether the Reserve Bank had any tools to prevent speculators buying Australian dollars to $US1.10. Mr Stevens replied that, rather than speculators, there usually was a rational reason for big exchange rate movements. “You could do a scenario where the exchange rates goes way up,” he said. “We’ve got one of the better-performing economies in the world. Even at very low interest rates, we still have a positive differential and we’re a country where the people here are, I think, reasonably confident about the future and foreigners are fairly confident about our future, and it’s not entirely surprising that they’re a bit keen on the currency.”

Mr Stevens suggested that this could change if economic recoveries in other countries surprised on the upside. “But you could do a scenario of the one you suggest and, in that world, perhaps inflation is lower, but the reason the AUD exchange rate is up there is probably that there are some very strong growth dynamics and trade dynamics at work here.”

The Australian dollar exchange rate has not traded at parity with the US dollar rate since the local currency floated in late 1983, but appeared headed towards this level before the global crisis hit.

for the full story visit http://www.news.com.au

Pounds to Australian Dollars = 1.7738
Euros To Australian Dollars = 1.6155
Australian Dollars to US Dollars = 0.9226
Australian Dollars to New Zealand Dollars = 1.2395

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Get in the queue for an Australian property boom

Australian Dollar Rate Outlook

IT'S the proof we've been waiting for that the housing boom is back - at dinner tables across the country talk is returning to the old conversation chestnut, Australian property prices.

While the global financial crisis made us all armchair investment analysts, now lower interest rates, government bonuses and the first home market boom was again making property the hot topic.

On any given Saturday huge numbers of prospective buyers are flocking to open houses everywhere. Nowhere is the craze more evident than in the median home market, where young families are trying to make the most of the demand from first time buyers to sell and trade up for more space.

But with medium-priced houses in limited supply, real estate circles are rife with rumours of auction punch-ups and inspection queues rivalling nightclubs. Sydney's Michelle Wheeler and Reima Woolhouse have been riding the $700,000 to $1.2 million price bracket explosion for six months.

The pair recently sold two properties and have been renting while they try to find a home with a bit of space. "There are properties we wanted to buy but we didn't make the first open house because they have sold before then or they just didn't tick the right boxes for us," Ms Wheeler said. "We've been starting to feel a bit disheartened. "We've been saying to each other selling the two properties was less stressful than buying."

On Saturday, the pair inspected an original Californian bungalow on Iandra St, Concord West.
Likely to sell for about $900,000 at auction next month, it is on the market for the first time in 45 years and requires significant work. The home had more than 35 groups through, many expressing interest. Paul Pettenon from Raine and Horne Concord said homes such as that had been selling just days after being advertised.

Recently, a two-bedroom Concord property that did make it to auction attracted 36 registered bidders. "It was mayhem, you couldn't control it actually," he said.

"I have been in real estate for 15 years and I have never seen anything like it."
And it is not just the inner-west. Megan Bruton from McGrath Hunters Hill said open houses around Ryde have needed three open house agents to deal with the record numbers of people inspecting homes.

"Previously when we launched a property we would get 20 or 30 groups through if it was really hot," she said. "But now we are getting 60 to 75 which equates to about 120 to 200 people for just a half-hour." Business analyst for LJ Hooker David Maher said low stock and high demand in the second-home buyer's bracket was making a seller's market.

"What everyone has been focusing on is the first-home buyer's market but that is simply not true," he said. According to his figures, homes in the $700,000 to $1.2 million range were selling at auction 80 per cent of the time, up from the beginning of the year when only 40 per cent were selling. "Auction clearance rates haven't been this good in many years," Mr Maher said.

Real Estate Institute of NSW president Steve Martin said many new people were in the market.
"First-home buyers in particular are feeling in control of their own destiny and not in the hands of landlords," he said. "When there is insecurity, buying property becomes a security."

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

Pounds to Australian Dollars = 2.0800

Euros To Australian Dollars = 1.7700

Australian Dollars to US Dollars = 0.7826

Australian Dollars to New Zealand Dollars = 1.2450

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Australian Banks Downgraded

Australian Dollar Rate Outlook

Moody's says that its industry outlook for banking systems in Australia and New Zealand is negative, reflecting the impact of the slowdowns in global and domestic economies, but both
systems also remain robust.

These headlines helped keep New Zealand Dollars and Australian Dollars exchange rate trading near the lows overnight, and on the open in London we've sold Australian Dollars for real money names. However the dip in New Zealand Dollars rate has seen some good exporter demand as resting bids are finally filled.

Pounds to Australian Dollars = 2.0800
Euros To Australian Dollars = 1.7700
Australian Dollars to US Dollars = 0.7826
Australian Dollars to New Zealand Dollars = 1.2450

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Australian Dollar fall was due to hedge funds

Australian Dollar Rate Outlook

The precipitous fall in the Australian dollar was increasingly driven by the whims of financial market players, such as hedge funds, while "real" economic developments played a diminishing role, The Sydney Morning Herald reports citing the Reserve Bank of Australia. The plunging Australian dollar shocked markets last year when it toppled from within a whisker of $1.00 to almost 60 US cents, a move which few analysts had predicted. In new research, the RBA says that fund managers' balance sheet adjustments and their use of the dollar as a proxy for emerging markets have exacerbated the dollar's slump, the report says.

Pounds to Australian Dollars = 2.0300
Euros To Australian Dollars = 1.7800
Australian Dollars to US Dollars = 0.7800
Australian Dollars to New Zealand Dollars = 1.2690

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IMS Foreign Exchange

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790