Friday, 21 November 2008 - Market Commentary


:: Australian Dollar: The Australian dollar held onto what had been strong technical support around 0.6350 in Asia yesterday with the RBA revealing it had spent a massive 3.2 billion Aussie dollars “providing liquidity” for the local currency in October. With the local share market losing over 4% in trade yesterday to take losses from its peak in November 07 to over 50% the Aussie battler was punished severely falling to 0.6250 during London trade. Treasurer Wayne Swan followed on from comments made by the RBA governor Stevens in attempting to calm the public and also defend the government’s controversial growth forecasts in a speech overnight however his comments went by unnoticed and the Aussie continued to decline. The carnage intensified during the U.S time-zone as the selling frenzy on equity markets persisted to push the AUD to this morning’s low of 0.6080.

- We expect a range today in the AUD/USD rate of 0.6000 to 0.6150

:: Great Britain Pound: U.K Retail Sales surprised the market overnight by falling just 0.1% against expectations of a much larger 0.9% drop in October taking the year to date figure to 1.9%. The Pound Sterling failed to rally however as the outlook for consumer spending throughout 2009 remains very gloomy and the market has other issues to contend with at present. Panic and fear escalated overnight as global equity markets continued the recent meltdown sending GBP/USD to open this morning making new lows at 1.4740, its lowest level since June 2002. With the Aussie dollar collapsing in late U.S trade the cross rate opens substantially higher at 2.4230 after finishing around 2.3450 in Asia yesterday.

- We expect a range today in the GBP/AUD rate of 2.4050 to 2.4450

:: New Zealand Dollar: The Kiwi appeared to be holding up quite well during European trade holding onto support at 0.5350 despite the Aussie dollar collapsing. It did however finally give way to a barrage of selling during New York exchange as U.S economic data once again disappointed the market. Equity prices continued their capitulation with the Dow Jones losing over 5% for the second consecutive day taking the Kiwi to this mornings open at 0.5210 after having exchanged as low as 0.5185 in early trade, its lowest level since December 2002. Today sees the release of October visitor arrivals and credit card spending out of New Zealand which are not likely to have much impact on the currency with all eyes still firmly fixed on risk aversion.

- We expect a range today in the NZD/USD rate of 0.5150 to 0.5280

:: Majors: The big dollar headed into offshore trade yesterday clinging onto support at 95 against the Japanese Yen and around 1.2470 Euro as the Bank of Japan began their two day policy meeting. German Producer Prices held up better than expected coming in flat amidst analysts forecasts of a decline of 0.7% during the month of October taking the annual rate down from 8.3% to 7.8%. The Euro received a slight boost during London trade with New York investors pushing it up to an overnight high of 1.2595. Once again negative U.S economic data revealed the depths of a recession with larger than expected drops in the Philadelphia Fed Index, Leading indicators and jobless claims all pointing towards a worsening contraction in the economy. USD/JPY remained extremely volatile dropping to 94.30 before bouncing back to 96.20 but the move was short lived as it opens on its lows at 94.10 this morning. The markets will be looking towards Asian equity markets and the announcement from the BoJ today who are not expected to alter the official interest rate from 0.3% but are likely to indicate some major concerns about the state of the Japanese economy. Despite this it appears the Yen will remain in favour with investors seeking comfort from government backed treasuries.

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