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Aust dollar closes at two-week low

12 Nov 2008 5:23 PM

SYDNEY, Nov 12 AAP - The Australian dollar closed at a two-week low today as another ordinary session on regional equity markets turned traders offrisk-driven currencies.

More sharemarket slides are tipped to push the local currency back toUS0.6000.

At 1700 AEDT, the Australian dollar was trading atUS0.659905, down 1.15 US cents, or 1.7 per cent, from yesterday's close of 0.671418.

This was the weakest closing level since October 29, when the Australian dollar finished the session atUS0.640613.

During the day, the unit traded between a morning low ofUS0.6540 and an early afternoon high of 0.6629, after hitting a two-week low ofUS0.6479 during offshore trade.

The Australian dollar failed to break above Tuesday's closing level as investors focused on the 1.1 per cent slide in the Japanese Nikkei index today.

Societe Generale chief foreign exchange dealer Paul Milton said the fluctuating fortunes of the Japanese sharemarket sparked a sell-off in high-yielding currencies like the Australian dollar.

"There doesn't seem to be much natural interest in the Aussie at the moment," he said.

"It's all equities-driven at the moment.

"It's on a risk aversion mentality."

A smaller than expected rise in the labour price index for the September quarter also fuelled financial market expectations for a series of interest rate cuts from the Reserve Bank of Australia (RBA).

"It's definitely added fuel to the fire for the Aussie (dollar)," Mr Miltonsaid.

Australian Bureau of Statistics data out today showed a 0.9 per cent rise in the labour price index during the September quarter, marginally lower than market forecasts of a one per cent rise.

Economists said the RBA would be less concerned about wages inflation.

Westpac revised down its forecasts for the cash rate to a low of 3.50 per cent, from four per cent.

"In these turbulent times we reserve the right to be more flexible with ourrate calls than in more normal times," Westpac chief economist Bill Evans said.

Mr Milton said the Australian dollar could retest a five and a half year low close toUS0.6000 in coming weeks if the currency sunk below $US0.6450.

"It could happen in the next couple of hours or the next couple of days," he said.

"It all depends on how equity markets fare in the next little bit."

The domestic currency fell toUS0.6012 on October 28.

CURRENCY TABLE: Currency snapshot at 1700 AEDT


AUDUSD 0.6599-05 0.6715-18

AUDJPY 64.48-55 65.79-85

AUDEUR 0.5250-58 0.5266-72

AUDNZD 1.1454-69 1.1448-77

AUDGBP 0.4274-83 0.4280-89

EURUSD 1.2563-66 1.2734-37

USDJPY 97.70-73 97.96-99

EURJPY 122.74-79 124.75-80

(*Closes taken at 1700 AEDT Previous local session)

At 1600 AEDT, the RBA's trade weighted index (TWI) was at 54.7, down from yesterday's close of 55.4.

AAP sajlk=0A