Aust dollar firms as $42 billion stimulus passed
By Stephen Johnson and Ed Logue13 Feb 2009 5:47 PM
SYDNEY, Feb 13 AAP - The Australian dollar closed firmer after the senate passed the federal government's biggest-ever economic stimulus plan.
At 1700 AEDT, the Australian dollar was trading at 65.77 US cents, up more than a third of a US cent from Thursday's close of 65.39 cents.
The Australian dollar hit a mid-afternoon high of 65.96 US cents after South Australian independent senator Nick Xenophon agreed to vote for the $42 billion package, on the condition spending on the Murray-Darling Basin was brought forward.
CMC Markets foreign exchange dealer Tim Waterer said the Australian dollar benefited as traders viewed any moves to stimulate a struggling economy as positive.
"Any government that's proactive, their currency is getting a boost," he said.
The Australian dollar opened weaker on Friday, sinking to an early low of 64.40 US cents, but it recovered in mid-morning trade as foreign exchange markets reacted positively to media reports the US government would use taxpayer funds to reduce interest rates for struggling home borrowers.
Still, Mr Waterer said the Australian dollar would struggle to hold above 66 US cents during offshore trade as investors waited for more details of the Obama administration's plan to reduce mortgage foreclosures.
"It's too early to say this is the solution," Mr Waterer said.
At 1700 AEDT, the Australian dollar was at 59.85 Japanese yen, up from Thursday's finish of 58.90 yen, and at 50.92 euro cents, up from 50.66 euro cents on Thursday.
The euro finished at 1.2917 US dollars, up from Thursday's close of 1.2909 US dollars and at 117.54 Japanese yen, up from 116.25 yen.
The US dollar was at 91.01 Japanese yen, up from 90.07 yen.
Meanwhile, the Australian bond market closed weaker as reports of US government plans to aid mortgage holders encouraged investors to sell fixed-income securities.
At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was 4.245, up from Thursday's close of 4.188 per cent, while the yield on the April 2012 bond was at 3.118 per cent, up from 3.050 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract price was 95.795, down from Thursday's close of 95.850, while the March three-year bond futures contract price was at 96.890, down from 96.955.
ICAP senior economist Adam Carr said reports of a US government plan to help Americans with home loans gave a lift to risk sentiment, which had investors selling debts assets.
"There was all this talk about the US government buying and helping not just mortgages holders, but also people not that bad off with their mortgages," he said.
"That sparked a sharp rally in the US.
"As a result, that sparked some risk appetite."
The 90-day bank bill rate closed at 3.145 per cent, down marginally from Thursday's close of 3.147 per cent, while the 180-day bank bill rate was at 3.078 per cent, up from 2.965 per cent.
At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 54.5, down from Thursday's close of 54.4.
