Daily Forex Commentary 2/9/2010

:: Australian Dollar: The Australian Dollar opens higher today against its U.S. counterpart at 0.9095 after strong economic data releases in Australia and China on Wednesday. Hot on the heels of Tuesday's triumvirate of better-than-expected economic data came yesterdays second quarter national accounts which revealed the domestic economy grew at 1.2 per cent for an annual pace of 3.3 per cent. The Aussie dollar rallied sharply on the news towards US90 cents as investors raised their bets the Reserve Bank of Australia will raise interest rates again. Also supporting the local unit on the day was a 2 per cent rally on local equities and news from China the official Purchasing Managers Index rose to 51.7 in August from a 17-month low of 51.2 in July. Meanwhile, the Aussie hit a new 4-month high against the kiwi yesterday at 1.2822.

- We expect a range today in the AUD/USD rate of 0.9060 to 0.9135

:: Great Britain Pound: Pound Sterling opens higher today against the greenback at 1.5445. The currency initially dropped to an overnight low of 1.5336 after local manufacturing growth slowed to its weakest level in nine months. The August manufacturing gauge fell to 54.3 from a revised 56.9 in July. Despite a late rally up to 1.5491, the pound is off its highs and is likely to remain under pressure near-term as forthcoming fiscal austerity measures are expected to subdue growth. Meanwhile, the pound is weaker against both the Australian Dollar (1.6959) and the New Zealand Dollar (2.1680).

- We expect a range today in the GBP/AUD rate of 1.6900 to 1.7000

:: New Zealand Dollar: The New Zealand Dollar opens higher today against the greenback at 0.7110 after stronger than expected manufacturing data in the US prompted another "risk rally". During yesterday's domestic session, the kiwi received a much-needed boost from news across the Tasman that the Australian economy expanded by 1.2 per cent in the second quarter. The currency edged its way towards 0.7040, recovering some lost ground after an initial adverse reaction from investors after the collapse of South Canterbury Finance. However, with the Aussie dollar soaring yesterday, the kiwi took a hit on the cross-rate falling to fresh four-month lows around 0.7800.

- We expect a range today in the NZD/USD rate of 0.7060 to 0.7135

:: Majors: Demand for higher-yielding assets overnight has weakened the greenback against several major currencies after a report in the US showed manufacturing accelerated at a faster pace than economists had forecast. The big dollar opens at 84.40 versus the Japanese Yen after the Institute for Supply Management's measure of US manufacturing rose to 56.3 in August from 55.5 in July. The "risk rally" may be short-lived however as most recent economic data releases in the US have suggested the Federal Reserve may need to provide more stimulus to preserve the economic recovery. Meanwhile, the Euro opens sharply higher at 1.2806 despite a gauge of manufacturing in the 16-nation region declining to 55.1 in August from 56.7 in July. In overnight trade the Euro moved between a low of 1.2662 up to a high of 1.2855.

:: Data Releases: