TR: Aust dollar closes higher on back fo firmer euro
February 16 2010, 5:37PM
The Australian dollar closed higher on Tuesday as the local unit followed an afternoon rally of the eurozone currency.
At 1700 AEDT, the Australian dollar was trading at 89.35 US cents, up 0.74 per cent from Monday's close of 88.69 cents.
From 0700 AEDT, the local unit traded between 88.77 US cents and 89.44 cents.
"The euro rebounded in the afternoon and the Aussie and Kiwi rode on the back of it," Westpac senior currency strategist Sean Callow said.
Mr Callow said the local currency remained in a fairly narrow range during afternoon trade before firming on the coat-tails of a stronger euro from around 1530 AEDT.
The release of the minutes of the Reserve Bank of Australia's (RBA) February 2 monthly meeting had a small effect on the local currency, Mr Callow said.
The RBA said its decision to leave the cash rate unchanged at 3.75 per cent on February 2 was "finely balanced".
RBA board members said further rate increases were possible if the economy continued to improve as predicted.
"But they did not regard that outlook as requiring an increase at every meeting, and they saw the earlier moves to begin withdrawing monetary stimulus promptly as affording the board a degree of flexibility in its subsequent decisions," the minutes said.
"This allowed the possibility of waiting to receive some more information on how the economy was responding to the monetary tightening that had already occurred."
The Australian dollar fell from 88.95 US cents to 88.75 US cents within minutes of the release of the minutes but then held steady, Mr Callow said.
He said currency markets were quiet on Tuesday following the US public holiday on Monday and many Asian centres closed for Chinese New Year celebrations.
At 1700 AEDT, the Australian dollar was trading at 80.25 Japanese yen, up from Monday's close of 79.94 yen, and at 65.48 euro cents, up from 65.26 euro cents.
The euro finished at 1.3644 US dollars, up from Monday's close of 1.3594 US dollars, and 122.55 Japanese yen, up from 122.52 yen.
The US dollar was at 89.82 Japanese yen, down from 90.14 yen on Monday.
Meanwhile, the Australian bond market closed weaker on Tuesday after the minutes from the RBA February meeting lowered expectations of a rate hike next month.
At 1630 AEDT, the yield on the Commonwealth Government April 2020 bond was at 5.573 per cent, up from Monday's close of 5.536, while the yield on the May 2013 bond was at 4.860 per cent, up from 4.854 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract was at 94.420, down from Monday's close of 94.470, while the March three-year bond futures contract was at 95.120, where it closed previously.
ANZ senior rates strategist Tony Morriss said the local bond market was a bit weaker as it probably expected the minutes to provide a bit more insight into the RBA's decision.
"The market was looking for a bit of clarity and it was not forthcoming," Mr Morriss said.
"Any positions looking for a rate hike next month are being pared back a bit more."
At 1630 AEDT, the 90-day bank bill rate was at 4.160 per cent, down from Monday's close of 4.170 per cent, while the 180-day bank bill rate was at 4.360 per cent, down from Monday's close of 4.390.
At 1600 AEDT, the RBA's trade weighted index (TWI) was at 69.7 points, up from Monday's close of 69.3.
