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Aust dollar closes at three-week low as risk aversion takes hold<

20 Nov 2008 5:31 PM

SYDNEY, Nov 20 AAP - The Australian dollar has closed weaker on Thursday, dropping to a three-week low in a market gripped by escalating risk aversion.

At 1700 AEDT, the Australian dollar was trading atUS0.635054, down almost one US cent, or 1.5 per cent, from Wednesday's close ofUS0.644449.

It was the Australian dollar's weakest close since October 28, when it ended the local session atUS0.616366.

During the day, the local unit moved between a low ofUS0.6332 and a high ofUS0.6468.

The Australian dollar opened atUS0.645357 at 0700 AEDT but quickly came under pressure, moving belowUS0.6400 after Wall Street ended the New Yorktrading day at its lowest level in five years.

RBC Capital Markets senior currency strategist Sue Trinh said the Australian dollar suffered as the poor close on Wall Street extended into Asian trading.

"It really reflects this heightened risk aversion which is particularly bearish for carry trades," Ms Trinh said.

Ms Trinh said the a gloomy set of minutes from the US Federal Open Market Committee, which suggested growth could be weaker than expected and things were "likely to get worse before it gets better", drove sentiment during US trading.

In Sydney, the benchmark S&PASX200 index backpedalled 4.19 per cent, whilethe broader All Ordinaries index lost 4.32 per cent.

The Australian dollar's decline against the Japanese yen also reflected investors' distaste for high-yielding currencies.

At 1700 AEDT, the Australian dollar was trading at 60.4753 Japanese yen, down 1.77 yen, or 2.8 per cent, from Wednesday's close of 62.2528 yen.

Data out of Japan Thursday afternoon, which showed Japanese exports recorded their biggest decline in almost seven years, "had recession written all over it", Ms Trinh said.

Direction during the overnight session was expected to come from the release of US employment data via jobless claims for the week ending November 15.

Other economic data include the Philadelphia Federal Reserve's monthly manufacturing report, as well as the Leading Indicators index, a measure of likely future economic activity.

Separately, the Reserve Bank of Australia (RBA) said on Thursday it had boughtA3.15 billion in net spot foreign exchange transactions in the market in October.

It was the central bank's largest single monthly net market purchase of Australian dollars since records were published in January 1995 and followed 78 consecutive months of net sales of THE currency.

CURRENCY TABLE: Currency snapshot at 1700 AEDT


AUDUSD 0.6350-54 0.6444-49

AUDJPY 60.47-53 62.25-28

AUDEUR 0.5078-84 0.5103-10

AUDNZD 1.1753-75 1.1736-51

AUDGBP 0.4244-52 0.4308-15

EURUSD 1.2506-08 1.2626-30

USDJPY 95.22-26 96.58-59

EURJPY 119.09-15 121.94-98

(*Closes taken at 1700 AEDT Previous local session)

At 1600 AEDT, the RBA's trade weighted index (TWI) was at 53.3, down from Wednesday's close of 53.9.

AAP jtc=0A