Daily Forex Commentary 12/10/2010

:: Australian Dollar: The Aussie''s parity push paused during local trade yesterday after the release of domestic home lending data. Whilst the number of home loan approvals rose in August, the concern amongst investors was that finance for construction fell for the tenth straight month. Whilst this may not be enough to prevent the Reserve Bank from lifting rates next month, the currency made a hasty retreat from the intraday high of 0.9905 down to 0.9865. During the offshore session trade was lighter than usual owing to a New York public holiday. The Aussie opens on Tuesday morning at 0.9830.

- We expect a range today in the AUD/USD rate of 0.9810 to 0.9920

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:: Great Britain Pound: Pound Sterling opens weaker against the greenback at 1.5877 as the market speculates the Bank of England will increase its 200 billion pound bond-buying program (i.e. quantitative easing) to stimulate the economy. In overnight trade, the pound retreated from a high of 1.5963. However, inflation data is due for release tomorrow and may show consumer prices rose 3.1 per cent in September, which may reduce the likelihood of any further easing of monetary conditions. Meanwhile, the pound is marginally higher against both the Australian Dollar (1.6137) and the New Zealand Dollar (2.1100).

- We expect a range today in the GBP/AUD rate of 1.6100 to 1.6155

:: New Zealand Dollar: Whilst the kiwi moved lower during local trade on Monday, the outlook for the local unit remains positive. It opens today at 0.7512 against the greenback. Stronger commodity prices, a higher Australian Dollar and continued shunning of the greenback by investors are likely to remain supportive for the New Zealand dollar in the coming days. Profit-takers moved in yesterday taking the unit from an intraday high of 0.7570 down to 0.7520 where it traded throughout most of the European session.

- We expect a range today in the NZD/USD rate of 0.7490 to 0.7580

:: Majors: The big dollar corrected marginally overnight against both the Yen (82.10) and the Euro (1.3869) as financial markets were closed in Japan and the United States due to public holidays. Earlier in the session, the greenback hit fresh 15-year lows against the Japanese Yen at 81.39 and just two days ago was trading at an eight-month low of 1.4029 against the 16-nation Euro. Speculation continues the US Federal Reserve will increase quantitative easing measures to reduce the nation's stubbornly high unemployment rate and boost economic activity. Whilst exchange rates dominated discussions at the weekend's IMF meeting, nothing was resolved over claims that countries are relying on cheap currencies to aid growth.

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