Daily Forex Commentary 15/10/2010

:: Australian Dollar: The Aussie came within a whisker of parity during overnight trade hitting a high of 0.9993, its highest level against the US Dollar since the currency floated in 1983. Buoyed by strong commodities, high interest rates and a friendless greenback that has been sold heavily in recent weeks as the US Federal Reserve grapples with the prospect of pumping more money into their economy to avert a double dip recession. Adding to the bullish sentiment yesterday was the release of higher-than-expected inflation expectations which surged to 3.8 per cent this month according to the monthly Melbourne Institute survey. The official cash rate is tipped to rise by 25 basis points to 4.75 per cent next month. The Aussie eased back throughout the New York session and opens at 0.9912.

- We expect a range today in the AUD/USD rate of 0.9875 to 0.9965

:: Great Britain Pound: The Pound (1.6002) has moved higher against the U.S. Dollar, once again thanks largely to the well-documented greenback woes rather than any underlying Sterling strength. In overnight trade the pound hit a high of 1.6066. The pound however is underperforming against the Euro (0.8786) as the British economy languishes and traders speculate the Bank of England will be forced to keep rates at the record low of 0.5 per cent. Meanwhile, the pound opens higher against both the Australian Dollar (1.6131) and the New Zealand Dollar (2.1140).

- We expect a range today in the GBP/AUD rate of 1.6075 to 1.6145

:: New Zealand Dollar: The New Zealand Dollar opens lower today at 0.7560 after a fall during yesterday''s domestic session. Statistics New Zealand reported that August retail sales fell further than expected suggesting interest rates are likely to remain on hold. During overnight trade, the kiwi recovered hitting a high of 0.7643 on the back of a surging Australian Dollar. Also looming large on the data front is next weeks inflation reading 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.

- We expect a range today in the NZD/USD rate of 0.7535 to 0.7600

:: Majors: The so-called big dollar hit fresh calendar-year lows against a basket of currencies overnight and a new 15-year low versus the Japanese Yen at 80.88. Weaker-than-expected economic data added to the greenback's woes. Initial jobless claims ballooned to 462,000 for the week ending October 9, whilst the U.S. trade deficit widened 8.8 per cent to $46.3 billion in August. The gloomy growth outlook and the prospect of a second round of quantitative easing by the Federal Reserve continue to weigh on the US Dollar. Meanwhile, the 16-nation euro opens higher today at 1.4058.

:: Data Releases: