Aust dollar closes firmer as shares rally
By Ed Logue19 Jan 2009 5:56 PM
SYDNEY, Jan 19 AAP - The Australian dollar closed one per cent stronger as economic stimulus packages in the US and the UK gave a lift to high-yielding currencies.
At 1700 AEDT, the Australian dollar was trading at 68.13 US cents, up from Friday's close of 67.43 US cents.
On Friday, the United States Senate approved the remaining $US350 billion of the Troubled Asset Relief Program (TARP).
The incoming Obama administration has pledged to use $US50-100bn of the rescue plan to help prevent foreclosures on American mortgages.
In the United Kingdom, the Brown government spoke to Britain's biggest banks about insuring them against possible losses on dodgy loans.
The banks would promise to lift lending to consumers and businesses in return.
ABN Amro currency strategist Greg Gibbs said the economic packages in the US and UK to increase borrowing in their economies gave a boost to high-yielding currencies such as the Australian dollar.
"It is mainly reacting to hope surrounding the extra money flowing into banks from the US TARP funds, which were released late last week," Mr Gibbs said.
"Also, the speculation that the UK government is going to announce a similar recapitalisation and other measures to shore up banks in the UK, particularly to encourage banks to lend more across the economy.
"Generally, we are seeing an improvement in those growth orientated currencies such as the Australian dollar."
Mr Gibbs said hope related to the upcoming inauguration of Barack Obama as the 44th US president this week had also helped with risk appetite and lift the domestic currency.
"There maybe a bit of optimism surrounding a new administration in the US and all the positive things Obama will say with fiscal stimulus plans," he said.
At 1700 AEDT, the Australian dollar was at 61.93 Japanese yen, up from Friday's close of 60.96 yen, and at 51.06 euro cents, up from 50.96 euro cents.
The euro finished at 1.3343 US dollars, up from Friday's close of 1.3233 US dollars, and at 121.26 Japanese yen, up from 119.66 yen.
The US dollar was at 90.88 Japanese yen, up from 90.42 yen.
Meanwhile, the Australian bond market closed weaker as firmer equity markets lowered the appeal of debt assets.
At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 4.053 per cent, up from Friday's close of 3.983 per cent, while the yield on the April 2012 bond was at 3.213 per cent, up from 3.148 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract price was 95.945, down from Thursday's close of 96.020, while the March three-year bond futures contract price was at 96.795, down from 96.860.
Local equity markets closed stronger after receiving a boost from firmer commodity prices.
The benchmark S&P/ASX200 index closed up 1.08 per cent and the broader All Ordinaries index gained 1.03 per cent.
Westpac Banking Group senior market strategist Damien McColough said the slightly firmer tone on equity markets had investors reducing their holdings of fixed-income assets.
"There is nothing beyond that equities have had a little bit of an up day," Mr McColough said.
The 90-day bank bill rate closed at 3.702 per cent, down from Friday's close of 3.738 per cent, while the 180-day bank bill rate was at 3.440 per cent, down from 3.457 per cent.
At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 55.7, up from Friday's close of 55.1.
