Forex Daily Commentary - 21/08/2009

Australian Dollar: The Australian Dollar opens higher on Friday (0.8310) and is showing signs of consolidation above the 0.8250 mark. The local unit's fortunes have fluctuated lately in line with risk appetite and movements in global equity markets. The prospect of higher interest rates in Australia is very-much priced into the currency at current levels. Underpinning the Aussie yesterday was news that the Reserve Bank of Australia slowed down its sales of the currency in July, selling A$705 million after making the biggest net sales since 2004 in the previous two months. There is very little economic data scheduled for release anywhere today.

- We expect a range today in the AUD/USD rate of 0.8240 to 0.8340

Great Britain Pound: Pound Sterling opens lower today (1.6500) against its US counterpart as Britain posted a record budget deficit in July. The budget shortfall was GBP8bio compared to a GBP5.2bio surplus a year earlier. The pound hit an overnight low of 1.6450 as traders and investors are concerned the recovery is based on unsustainable government spending. UK retail sales grew at a slower pace in July climbing 0.4 per cent. Meanwhile, the pound is weaker against both the Australian Dollar (1.9840) and the New Zealand Dollar (2.4350).

- We expect a range today in the GBP/AUD rate of 1.9750 to 2.0000

New Zealand Dollar: The New Zealand Dollar marginally higher at 0.6765 on Friday. The kiwi spent most of yesterday consolidating after several volatile sessions. In the absence of any local economic data on Thursday, the kiwi tracked the Aussie lower down to 0.6725 but sentiment turned around as equity markets in the region reversed some of the previous session's losses. In overnight trade the kiwi traded as high as 0.6780 after better-than-expected manufacturing data in the United States encouraged investors to take on more risk. New Zealand visitor arrivals data for July is scheduled for release today but is unlikely to have any impact on the local currency.

- We expect a range today in the NZD/USD rate of 0.6720 to 0.6800

Majors: The big dollar was mixed overnight with several major currency rivals completing the session at similar levels to the day's opening levels. The Euro closed at 1.4251 compared to 1.4221 and likewise the USD/JPY which closed at 94.17 compared to 94.03 at the open. In the United States, the Philadelphia-area manufacturing report showed an expansion in August for the first time in almost 12 months in a sign the US economy is recovering. Risk appetite improved and traders took the Euro to an intraday high of 1.4274. Meanwhile, the Canadian Dollar (1.0870) rose to its highest level against the greenback this week on speculation higher oil prices going forward will underpin the currency.

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