... So that You may be kept informed

Aust dollar ends at one-month low

By Stephen Johnson
13 Jan 2009 6:01 PM

SYDNEY, Jan 13 AAP - The Australian dollar closed at a one-month low, shedding almost two US cents, as another bad day on Wall Street and sharp commodity price drops hit high-yielding currencies.

At 1700 AEDT, the Australian dollar was trading at 67.47 US cents, down 2.78 per cent from Monday's close of 69.40 cents, marking the weakest session finish since December 16.

The Australian dollar lost momentum within the first hour of local trade as New York's S&P 500 index closed weaker for the second straight day, shedding 2.26 per cent on Monday night.

The currency opened at 68.25 US cents then went backwards for the rest of the session, hitting a four-week low of 67.38 US cents by lunchtime as bleeding resources stocks wounded the local share market.

Commodity prices tumbled, with copper prices shedding 4.55 per cent and crude oil prices falling by more than two per cent to less than $US37 a barrel.

A currency analyst with financial markets research group Forecast, Lee Wai Tuck, said faltering share markets and commodity prices weakened demand for risky assets like the Australian dollar.

"It's a bit of risk aversion," Mr Lee said from Singapore.

"Market players will be cautious and they will reduce their risks, and pare back their speculative positions."

The Australian dollar recovered from its daily lows in the afternoon, but stayed below 68 US cents, as Standard and Poor's reaffirmed Australia's AAA foreign-currency credit rating.

Mr Lee predicted the domestic currency would climb back to 68.50 US cents during offshore trade as the positive credit rating news encouraged traders to buy the Australian dollar on the dips.

Australian housing finance data for November was expected to put the local currency under pressure on Wednesday, as financial markets continue to price a large rate cut next month.

At 1700 AEDT, the Australian dollar was at 60.29 Japanese yen, down 3.6 per cent from Monday's close of 62.57 yen, and at 50.90 euro cents, down from 51.75 euro cents.

The euro finished at 1.3259 US dollars, down from Monday's close of 1.3411 US dollars, and at 118.45 Japanese yen, down from 120.89 yen.

The US dollar was at 89.35 Japanese yen, down from 90.14 yen.

The Australian bond market closed firmer as equity and commodity prices weakened on the back of weaker US economic data, increasing the risk aversion of investors.

At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 3.956 per cent, down from Monday's close of 4.100 per cent, while the yield on the April 2012 bond was at 3.165 per cent, down from 3.288 per cent.

On the Sydney Futures Exchange, the March 10-year bond futures contract price was 96.035, up from Monday's close of 95.895, while the March three-year bond futures contract price was 96.845, up from 96.715.

ICAP senior economist Adam Carr said a combination of weak US economic data in recent weeks was driving the flight back to fixed-income assets.

The 90-day bank bill rate closed at 3.910 per cent, down marginally from Monday's close of 3.918 per cent, while the 180-day bank bill rate was at 3.577 per cent, down from 3.603 per cent.

At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 55.2, down from Monday's close of 56.1.