Dollar Is High On Back Of Economic Forecasts
October 18th, 2011
THE Australian dollar was stronger today after a British newspaper reported that France and Germany were ready to sharply boost the eurozone's rescue fund in a bid to address the public debt crisis.
Citing unnamed European Union diplomats, The Guardian reported that the leaders of France and Germany, the eurozone's biggest economies, had agreed to boost the rescue fund to two trillion euros ($A2.72 trillion).
The suggestion of a solution to the sovereign debt crisis sparked a surge of interest in the Australian dollar.
At 1200 AEDT today, the local unit was trading at 102.51 US cents, up from 102.04 cents on Tuesday.
The unit reached 103.26 US cents early this morning, before easing off to a low of 102.32 US cents about 1100 AEDT.
On Monday night, it peaked at 103.72, its highest level since September 19.
Commonwealth Bank chief currency strategist Richard Grace said the spike in the currency coincided with trade in New York, and this morning's fall in value was the unwinding of that.
"The market's got very fragile sentiment at the moment, it's whipsawing around,'' Mr Grace said."There's no clear direction here.''
Reports of a deal between France and Germany followed indications on Monday that progress on the debt issue was slow.
Mr Grace said any official announcement would likely have a bigger effect on the market than the report being circulated by The Guardian.
"I think people want to see some concrete action and in that
sense they're waiting for this weekend,'' Mr Grace said referring
to Sunday's EU summit in Brussels aimed at overcoming the eurozone
sovereign debt crisis.
Meanwhile, the Australian bond market was stronger at noon.
At 1200 AEDT on Wednesday, the December 10-year bond futures contract was trading at 95.505 (implying a yield of 4.495 per cent), up from 95.500 (4.500 per cent) on Tuesday.
The December three-year bond futures contract was at 96.180 (3.820 per cent), up from 96.170 (3.930 per cent).