THE Australian dollar slipped on fears of monetary moves in China, and the sharemarket fell as mining losses offset banking gains today. The benchmark S&P/ASX 200 index shed 28 points, or 0.59 per cent, to 4755.70, while the broader All Ordinaries index fell 31.1 points (0.64 per cent) to 4860.90. On the ASX 24, the March share price index futures contract was down 34 points at 4736, with 31,955 contracts traded. At 0545 GMT in money markets, the Australian dollar traded at US98.50 cents, down from US99.47c late yesterday. Against the Japanese yen, the Australian dollar changed hands at Y81.69, from Y81.71. Bell Potter Securities senior client adviser Stuart Smith said heavy falls in commodity prices overnight wiped 73 points of the London Metal Exchange and “unstitched” BHP Billiton and Rio Tinto's trading on the local bourse. Both mining giants lost more than 3 per cent in London trade after the price of copper fell 2.3 per cent and zinc dropped 1.8 per cent. At the ASX, BHP closed down 48 cents (1.06 per cent) at $44.71 and Rio Tinto lost $1.19 (1.39 per cent) to $84.38. Mr Smith said reports of commodity-price falls on the back of China's gross domestic product and inflation figures yesterday were overdone. “They were telegraphed last Monday. The market has been quite aware that the growth was over 10 per cent. “All they (Chinese authorities) are trying to do is stifle speculation (out of commodity prices) without denting the momentum that they've built up in the last 30 years.” BHP Billiton and Rio Tinto's losses were balanced out by the banking sector. “My charting suggests we could put on 5 per cent in the bank index,” Mr Smith said. ANZ Bank led the financials sector, gaining 27c (1.17 per cent) to $23.33, while rivals Westpac and National Australia Bank each put on 0.7 per cent. Commonwealth Bank finished flat at $51.66. Investors wiped another 1.08 per cent off Insurance Australia Group and 0.61 per cent off QBE Insurance Group. IAG closed at $3.68 and QBE finished at $17.88. Oil majors also closed in negative territory after Woodside Petroleum reported a fall in full-year oil and gas production and sales, but said revenue jumped as a result of higher commodity prices. Woodside's shares declined 27c (0.63 per cent) to $42.50, Santos lost 16c (1.17 per cent) to $13.57 and Oil Search slipped 11c (1.6 per cent) to $6.78. Elsewhere in the sector, BC Iron surged 11c (3.47 per cent) to $3.28 after announcing it will expand into other commodities and offshore projects after a planned $345m takeover by its second-largest investor. Fortescue Metals Group shares fell 14c (2.1 per cent) to $6.49. Retailers were mixed, with Wesfarmers - owner of Coles supermarkets - adding 11c to $33.62, while rival Woolworths fell 32c (1.15 per cent) to $27.47. In forex, Australian bonds dropped on both ends of the curve, continuing a series of declines over the past few weeks. Weighing heavily on the Australian dollar was more concern of tightening ahead in China. A decision to tighten rates in hopes of cooling growth in China would weigh on the Australian dollar, given China is Australia's largest trading partner. Coupling with the China news report, a series of Australian economists and traders during the day came out with annual forecasts that projected a weak performance for the local currency this year, after its run to parity with the US dollar in 2010. Scott Haslem, chief economist for UBS in Sydney, notes the devastating floods in Queensland could even play a factor. “While interest rate support for the (Australian dollar) remains structurally strong, momentum around this factor is starting to wane as (Reserve Bank of Australia) expectations are delayed on weaker weather-affected data and solid US data raises the risk of earlier Fed action,” said Mr Haslem, who targeted US97c by mid-year and US93c by the end of 2011.

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