Daily Forex Commentary 14/10/2010

:: Australian Dollar: The Australian Dollar opens higher against the greenback today at 0.9900 after hitting a post-1983 float high of 0.9936 during brisk overnight trade. The Aussie rallied throughout most of Wednesday's domestic session buoyed by a bounce in consumer sentiment. The Westpac-Melbourne Institute index rose by 3.3 per cent to 117 in October as employment remained strong. There was plenty of volume going through the market and the unit gyrated between 0.9845 and 0.9890 before heading into the Europe session around 0.9860. Greenback weakness across the board continues to bolster our currency as the US Federal Reserve contemplates further economic stimulus, most likely in the form of quantitative easing.

- We expect a range today in the AUD/USD rate of 0.9875 to 0.9940

:: Great Britain Pound: Sterling opens marginally higher today at 1.5885, propped up largely by greenback weakness rather than any underlying pound strength. Despite inflation above the central bank target of 3 per cent, policy makers are divided on the next move in interest rates. The uncertainly is keeping a lid on the pound which last night traded between a low of 1.5773 and a high of 1.5907 against its US counterpart. Meanwhile, the pound is little-changed against both the Australian Dollar (1.6050) and the New Zealand Dollar (2.0891).

- We expect a range today in the GBP/AUD rate of 1.6000 to 1.6060

:: New Zealand Dollar: The New Zealand Dollar opens higher today against its US counterpart at 0.7595 after climbing steadily throughout local trade on Wednesday. Greenback weakness across the board continues to bolster the kiwi as the US Federal Reserve contemplates further economic stimulus, most likely in the form of quantitative easing. However, looming in the minds of traders will be next weeks local inflation data which is expected to come in at a ten year low of 1.3 per cent. This may keep a lid on the kiwi, particularly against the Australian Dollar where interest rates in that country are widely tipped to increase next month. The kiwi opens against the Aussie this morning marginally lower at 0.7675.

- We expect a range today in the NZD/USD rate of 0.7580 to 0.7625

:: Majors: Strong corporate earnings reports in the United States has led to a risk rally on currency markets. In overnight trade, the Euro (1.3956) nudged a ten-month high against the greenback at 1.4001 after industrial production in the 16-nation zone rose 1 per cent in August after a revised 0.1 per cent increase the previous month. The greenback is also weaker against the Swiss Franc, Canadian, Australian and New Zealand Dollars as speculation continues that the US Federal Reserve will provide further economic stimulus in the form of quantitative easing. Meanwhile, the big dollar opens at 81.73 versus the Japanese Yen, marginally above the 15-year low of 81.39 reached on October 11.

:: Data Releases: