Aust dollar lower at noon, bonds weaker
22 Jan 2009 12:36 PM
SYDNEY, Jan 22 AAP - The Australian dollar was slightly weaker at noon as the first contraction in South Korea's economy since 1998 had investors selling the commodities-driven currency.
At 1200 AEDT, the Australian dollar was trading at $US0.6549/53, down from Wednesday's close of $US0.6552/55.
During the morning, the currency moved between $US0.6541 and $US0.6642.
The local currency rose early in the local session as a firmer finish on Wall Street strengthened investor sentiment in favour of risk-sensitive assets, such as the Australian dollar.
The Dow Jones industrial average ended up 3.51 per cent and the tech-laden Nasdaq composite index rose 4.6 per cent.
But the first contraction in South Korea's economy for a decade had a negative effect on the Australian dollar, Commonwealth Bank currency strategist Joseph Capurso said.
South Korea is Australia's third largest export market.
South Korea's economy shrank in the fourth quarter of 2008 for the first time in a decade, contracting 5.6 per cent.
The nation's economy last shrank on a year-on-year basis in the fourth quarter of 1998, when it contracted six per cent in the throes of the Asian economic crisis.
For all of 2008, South Korea's economy grew 2.5 per cent, its slowest performance since a contraction of 6.9 per cent in 1998.
"One of the things we suspect that is pushing the Australian dollar down is the very weak GDP data report out of South Korea this morning," Mr Capurso said.
"That was much, much weaker than expected.
"The fear in the market is that the South Korean numbers could be looked as a pre-cursor to the Chinese numbers that are coming out (later today)."
China's gross domestic product (GDP) data for the fourth quarter of 2008 is scheduled for release at 1300 AEDT on Thursday.
The world's most populous nation is Australia's second largest export market.
Mr Capurso said the Chinese GDP data would be the key to the Australian dollar's performance during the rest of the Asian session.
"The economists' median annual growth is 6.8 per cent (down from nine per cent)," he said.
If the GDP data was below forecast, Mr Capurso said the Australian dollar could test $US0.6450, if not lower.
CURRENCY TABLE: Currency snapshot at 1200 AEDT
CURRENCY SPOT PREVIOUS CLOSE
AUD/USD 0.6549-53 0.6552-55
AUD/JPY 58.19-25 58.87-92
AUD/EUR 0.5041-51 0.5037-45
AUD/NZD 1.2443-56 1.2376-90
AUD/GBP 0.4712-22 0.4683-92
EUR/USD 1.2979-81 1.2996-99
USD/JPY 88.86-89 89.86-89
EUR/JPY 115.34-38 116.80-85
(*Closes taken at 1700 AEDT Previous local session)
At 1200 AEDT, the Reserve Bank of Australia's trade weighted index was at 53.9, steady with its close on Wednesday.
The Australian bond market was weaker at noon.
At 1200 AEDT, the yield on the Commonwealth Government March 2019 bond was at 4.150 per cent, up from Wednesday's close of 4.075 per cent, while the yield on the April 2012 bond was at 3.178 per cent, up from 3.130 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract price was 95.855, down from Wednesday's close of 95.920, while the March three-year bond futures contract price was at 96.830, down from 96.870.
SECURITY YIELD PREVIOUS CLOSE
CGS 5.25 pct Mar 2019 4.150 4.075
CGS 5.75 pct Apr 2012 3.178 3.130
90-day bank bill rate 3.580 3.610
180-day bank bill rate 3.353 3.337
Sydney Futures Exchange
CONTRACT PRICE PREVIOUS CLOSE
Mar 2009 10-yr bond futures 95.855 95.920
Mar 2009 3-yr bond futures 96.830 96.870
Mar 2009 bill futures 96.940 96.950
Jun 2009 bill futures 97.300 97.300
