Daily Commentary - 17/09/2009

:: Australian Dollar: The Australian Dollar opens sharply higher on Thursday at 0.8725 on greenback weakness and a continuation of the recent shift into high-yielding assets. The Aussie climbed during local trade on Wednesday as Asian equity markets rallied. The positive theme continued during the European session and the unit broke through US87 cents for the first time in twelve months. With U.S. interest rates at 0.28 per cent for three months, investors have been lured to Australian-denominated assets which earn 2.93 per cent for the same tenor. Economic fundaments and recent moves higher in commodities are also underpinning the local currency.

- We expect a range today in the AUD/USD rate of 0.8640 to 0.8760

:: Great Britain Pound: Pound Sterling remains weak against the greenback and opens on Thursday in Sydney at 1.6500 after UK unemployment rose to 7.9 per cent in the three months to July. The pound also weakened to a 4-month low against the Euro (89.31) and is still reeling from yesterday's comments by Bank of England Governor Mervyn King who signalled rates may be cut for reserves held at the bank. Meanwhile, the pound is sharply weaker against both the Australian Dollar (1.8850) and the New Zealand Dollar (2.3075).

- We expect a range today in the GBP/AUD rate of 1.8750 to 1.8940

:: New Zealand Dollar: The New Zealand Dollar opens sharply higher today at 0.7120 due to greenback weakness and a continuation of the recent shift into higher-yielding assets. The kiwi hit a new 13-month high overnight of 0.7150 after more positive U.S. economic data in the form of August industrial production climbing 0.8 per cent. With U.S. three-month interest rates at 0.28 per cent, investors have been lured to New Zealand-denominated securities which earn 2.73 per cent for the same period. The kiwi has also marginally outperformed the Australian Dollar and opens today at 0.8170.

- We expect a range today in the NZD/USD rate of 0.7075 to 0.7150

:: Majors: The big dollar moved to a twelve-month low against the Euro (1.4736) in overnight trade and a seven-month low against the Japanese Yen (90.11) as continuing positive U.S. economic data encourages investors to buy higher-yielding assets. Industrial production for the month of August climbed 0.8 per cent, exceeding market forecasts, whilst the Labor Department reported an increase in the CPI of 0.4 per cent. The so-called carry trade is alive and well and is being funded in greenbacks as investors chase the high three-month yields on offer in Australia and New Zealand. Meanwhile, the Yen rose after Japan's Finance Minister told reporters that recent currency movements aren't excessive.

:: Data Releases: