$A down on US Treasury moves
Written on March 11, 2012 – 12:14 pm | by Ashley Johnson
The Australian dollar has fallen on the back of a strong US dollar and equity market.
At 1700 AEDT, the Australian dollar was trading at 104.50 US cents, down from 105.23 cents yesterday.
Since 0700 AEDT, the local unit traded between 104.23 US cents and 104.70 cents.
NAB senior market economist David de Garis said surging bond yields and equity market performances in the US had weakened the Australian dollar.
“We’ve seen US bond yields push up for the past couple of days and relative strength in equity markets over the past couple of days,” he said.
“Taken together, in the past, those factors would have taken investors away from the safe-haven currencies and towards the risk currencies such as the Aussie.
“Now we’re seeing a more traditional interest-rate relationship between the US dollar and US interest rates, and then that’s weakened the Aussie.”
US Treasury yields lifted to their highest point since October on Wednesday after the release of strong retail data and comments on rising inflation from the Federal Open Market Committee.
Mr de Garis said the US economy had pushed to the fore as worries about Greece and the euro zone subsided.
“I think the recent retail sales figures in the US have shown that there’s strength in the demand side of the US economy as well, so there’s a picture emerging,” he said.
“The fact that the Greek issue has pushed aside for now has given markets reason to focus on the US.”
At 1700 AEDT, the Australian dollar was at 87.82 Japanese yen, up from 87.60 yen, and at 80.27 euro cents, down from 80.71 euro cents.
Meanwhile, Australian bond prices closed weaker.
At 1630 AEDT on Thursday, the June 10-year bond futures contract was trading at 95.685 (implying a yield of 4.315 per cent), down from 95.885 (4.115 per cent) yesterday.
The June three-year bond futures contract was at 96.190 (3.810 per cent), down from 96.380 (3.620 per cent).
There was a rollover in government bonds, with the March 10-year and 3-year bond futures contracts closing at 1200 AEDT, with prices of 95.780 (implying a yield of 4.220 per cent), and 96.250 (3.750 per cent) respectively.
Nomura rates strategist Martin Whetton said the Australian credit market had followed moves in the US Treasury.
“We’ve just broken a very long-term (six-month) range in US Treasuries overnight and into the Asian session, and that’s just made the Australian market very heavy,” he said.
The Reserve Bank of Australia’s trade weighted index was at 78.0, down from 78.3 yesterday.
