Australia: With a lack of economic releases during the offshore session, the markets were fairly subdued.

Despite the lack of direction, the AUD was still able to post fresh 26month highs after hitting USD0.9640, as the market continues to be in 'risk on' mode and investors take advantage of the higher yields.

The expectation of further interest rate increases in Australia are still influencing the market, with most now pricing in a greater than 50% chance that the RBA will increase interest rate by 0.25% at next months board meeting.

This will bring the cash rate to 4.75% compared to 0.25% in the US, 1% in Europe and 0.1% in Japan.

This morning the local currency has retreated from the highs, and while we expect it could soften when the local share market comes into play following the weaker night on US and European equity markets, it should remain in a fairly tight trading range until some influential economic announcements tonight out of the UK and Germany, as well as a raft of central bank announcements.

Majors: The USD strengthened against some of its rivals yesterday after the Wall Street Journal reported that Federal Reserve officials are considering new tactics to boost its sagging economy, including purchases of long tern US treasury securities, rather than a massive bond purchase with a finite end.

The markets saw this as a positive step; as Fed officials consider a smaller scale, more open ended program rather than the large quantitative easing program that markets were expecting.

Further concerns about Ireland's debt and the strength in the USD saw the EUR/USD weaken, opening at USD1.3430.

Moody cut the rating of the nationalized Anglo Irish Bank, and news reports fuelled speculation that Ireland was close to receiving monetary support from the European Central Bank.

Investors were on high alert for signs of Japanese intervention in the currency markets as the USD/JPY dipped to JPY84.11, its lowest point since the JPY2trillion intervention on September 15.

However the currency pair trading close to it's lows during the remainder of the session, with no signs of intervention and no official comments from the Bank of Japan.

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