Australia: The Australian Dollar has opened trade this morning in the high 0.9800's after touching a low of 0.9825
on Friday night.

The low followed on the release of higher than expected Chinese inflation yoy for October (4.4%) plus an increase in credit granted for October that raised concerns the Chinese government would be forced to slow their economy by tightening credit growth and dampening inflation.

This news spilled over to commodity and equity markets, which took a hit, and the AUD suffered as well.

US equity prices retreated (the Dow was off by 0.8% to 11,193, the S&P500 by 1.2% to 1,199 and NASDAQ by a larger 1.5%).

Both hard and soft commodity prices fell from the lofty heights of last week with gold down 2.8 % to US$1,369 an ounce and crude oil falling by its highest amount in 3 weeks to just under US$85 a barrel.

All base metals fell with nickel and zinc down by over 5% and the huge run by many soft commodities came to an end with wheat, corn and soybeans all down close o 5% but overshadowed by sugar which fell almost 12% after an increase in margin requirements on futures contracts.

All this activity overshadowed the closing of the G20 meeting in Seoul where (as expected) no firm decisions were made regarding how countries manipulated their currency valuations and also the close of the APEC meeting in Japan where there was general agreement to work towards a free trade agreement in Asia Pacific.

RBA board minutes are released tomorrow. It will be interesting to see how long the pullback in commodity prices and equity markets lasts given their recent strong appreciation.

Majors: Ireland was back in the headlines, which moved the EUR lower on concerns of its overall debt situation.

The Irish Enterprise Minister O'Keeffe said there was no crisis and a bailout would not be required. In general the
USD was higher against all the major currencies, which has seen the AUD cross rates move to lower levels we
have not seen for several weeks.

In all of this the US Federal Reserve began their first purchases of treasury securities under the QE2 program involving US$7.23bn of
4 and 6 year debt maturities but were overshadowed by the events in China and Ireland.

Interestingly prices fell on US government debt with rates rising by 8 bps on the 2 year debt and by 14bps on the 10 year maturities.

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