Dollar weaker as Wall St helps greenback

Source: AFP

THE Australian dollar has opened below 99 cents as another rally on Wall Street boosted the greenback.

At 7am AEST, the local currency was trading at 98.92 US cents, down from yesterday's close of 99.80 US cents, marking the weakest start to a session in 11 months.

HiFX senior dealer Dan Bell said a jump in the Dow Jones Industrial Average, to a record 15,215.25, buoyed the greenback, even though stronger risk sentiment has traditionally been a boon for the Australian dollar.

"The correlation between the US stock market and the Australian dollar has been breaking down over the last few months," he said.

"Investors are treating positive news in the US as ultimately positive for the US economy, which is actually supporting the US dollar and pushing up US bond yields."

US shares rose after Appaloosa Management hedge fund group boss David Tepper told CNBC the market could still soar higher.

With the greenback gaining strength, Mr Bell said, the Australian dollar was likely to hit 95 US cents in coming months, before falling to 85 US cents from next year.

"In the big scheme of things, the Australian dollar is still overvalued."

Traders did not appear phased by Treasurer Wayne Swan's Budget for 2013/14, which delivered a deficit of $18 billion for 2013/14, with a surplus forecast for 2016/17.

"That was pretty much as expected. I don't think it's given anyone too much of a surprise."

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Dollar weaker as Wall St helps greenback

Domestic economics under the microscope as the US maintains record highs. Commsec report

Source: AFP

THE Australian dollar has opened below 99 cents as another rally on Wall Street boosted the greenback.

At 7am AEST, the local currency was trading at 98.92 US cents, down from yesterday's close of 99.80 US cents, marking the weakest start to a session in 11 months.

HiFX senior dealer Dan Bell said a jump in the Dow Jones Industrial Average, to a record 15,215.25, buoyed the greenback, even though stronger risk sentiment has traditionally been a boon for the Australian dollar.

"The correlation between the US stock market and the Australian dollar has been breaking down over the last few months," he said.

"Investors are treating positive news in the US as ultimately positive for the US economy, which is actually supporting the US dollar and pushing up US bond yields."

US shares rose after Appaloosa Management hedge fund group boss David Tepper told CNBC the market could still soar higher.

With the greenback gaining strength, Mr Bell said, the Australian dollar was likely to hit 95 US cents in coming months, before falling to 85 US cents from next year.

"In the big scheme of things, the Australian dollar is still overvalued."

Traders did not appear phased by Treasurer Wayne Swan's Budget for 2013/14, which delivered a deficit of $18 billion for 2013/14, with a surplus forecast for 2016/17.

"That was pretty much as expected. I don't think it's given anyone too much of a surprise."

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Dollar below parity with US greenback

Wall Street is falling back from record highs overnight as retail markets pose a slight gain. Commsec report

Australian Money Source: Supplied

THE Australian dollar has remained below parity with the greenback as healthy American retail data underpinned strength in the US currency.

At 12pm AEST today, the Australian dollar was trading at 99.77 cents, down almost a quarter of a US cent from yesterday's close of 100 US cents.

The local unit fell last night, and continued to struggle this morning, after US Commerce Department data showed a retail sales jump of 0.1 per cent during April. While the rise was unspectacular, it was more upbeat than market forecasts of a 0.3 per cent drop, boosting the US dollar against most major currencies.

"At the moment, the market's quite sensitive to any sort of positive US news," OzForex chief currency strategist Jim Vrondas said. "We've seen them get long buying US dollars."

Still, Mr Vrondas said, the Australian dollar could briefly rise above parity with the US currency, to 101 US cents tonight, if Treasurer Wayne Swan's sixth budget is less draconian than financial markets expect.

"The expectations are it's going to be relatively tough, but maybe not as tough," he said, adding that traders would "sell on a rally" if the Australian dollar rose above 100 US cents.

The market has overlooked lending finance data for March, showing a 5.8 per cent rise in owner-occupier home loans.

Meanwhile, the Australian bond market was firmer at noon. At 12pm AEST today, the June 10-year bond futures contract was trading at 96.775 (implying a yield of 3.225 per cent), up from 96.750 (3.250 per cent) yesterday. The June three-year bond futures contract was at 97.440 (2.560 per cent), up from 97.410 (2.590 per cent) previously.

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Dollar below parity with US greenback

Wall Street is falling back from record highs overnight as retail markets pose a slight gain. Commsec report

Australian Money Source: Supplied

THE Australian dollar is holding below parity with the US greenback following better-than-expected American retail sales data.

At 7am AEST today, the local currency was at 99.53 US cents, almost half a US cent below yesterday's close of 100 US cents.

Today, the local currency started the trading session below parity with the US unit for the first time in 11 months, as a 0.1 per cent rise in American retail sales for April buoyed the greenback.

Bank of New Zealand currency strategist Mike Jones said the unexpected result, which beat forecasts of a 0.3 per cent drop, dealt a blow to the Australian dollar.

"The Aussie stands out as the weakest link on currency markets overnight," he said. "Generally speaking, it's been relatively quiet but Aussie dollar weakness has been eye-catching."

"It's more a US story than an Aussie-specific story."

The fall also follows a 9.3 per cent rise in Chinese industrial output for April, which was below the 9.5 per cent level expected by economists.

Mr Jones said the Australian dollar was likely to stay below parity with the US greenback today, ahead of the federal budget.

"Today's session probably is going to be all about consolidation for the Aussie dollar."

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