Australian Dollar down on US Fed Outlook
heraldsun.com.au, 28 January, 2010
AAP
, January 28 2010
The dollar opened half a US cent lower, after the US Federal Reserve gave a downbeat assessment of US economic growth.
At 7am AEDT, the dollar was trading at $US0.8948/50, down from yesterday's close of $US0.9005/07.
During yesterday's offshore session, the local unit traded between $US0.8920 and $US0.9024.
HiFX trading director Mike Hollows said the unit came under pressure after the US Federal Reserve announced it would leave the US target cash rate at its record low of zero to 0.25 per cent.
"The Aussie has had a really volatile night overnight," he said.
"We've obviously seen a move down into the low 89 US cent range after the US Federal Open Market Committee (FOMC) announcement that they were leaving rates unchanged."
In a move that depressed commodity currencies, such as the dollar, the Fed warned that high unemployment, lacklustre income growth and tight credit could crimp spending.
Start of sidebar. Skip to end of sidebar.
End of sidebar. Return to start of sidebar.
The FOMC is the policy making arm of the US Federal Reserve and meets at least eight times a year to determine monetary policy.
"They were also downbeat, talking about rates being low for an exceptionally low period," Mr Hollows said.
"From a growth perspective, a lot of that is broadly negative for the commodity currencies and has weighed on the Aussie this morning."
Mr Hollows said yesterday's release of higher than expected inflation data did not confirm a 25 basis point rate rise in February.
"A February rate rise is still 50/50," he said.
Australia's headline consumer price index (CPI) rose 0.5 per cent in the December quarter, for an annual rate of 2.1 per cent, the Australian Bureau of Statistics said.
The median market forecast was for the headline CPI to rise by 0.4 per cent in the quarter, for an annual pace of 2.0 per cent.
The underlying rate of inflation, according to the average of the ABS trimmed mean and weighted median measures, rose 0.65 per cent in the quarter and 3.4 per cent over the year.
That compared to expectations for 0.6 per cent quarterly rise and a 3.35 per cent annual rate.
Most economists expect the RBA to raise the cash rate by 25 basis points, or quarter of one per cent, to four per cent next week.
Mr Hollows said he expects today's domestic session to be volatile and choppy, with the local unit possibly hitting a low just under $US0.8900.
To visit site click here.
HiFX Ltd is not responsible for the content of external sites