Daily Forex Commentary 31/8/2010

:: Australian Dollar: The Australian Dollar moved above US90 cents for the first time in over a week as sentiment was buoyed by recent comments from the US Federal Reserve that it is prepared to take steps to safeguard the world's largest economy from falling back into recession. Early yesterday, the Aussie hit a high of 0.9030 as commodity prices firmed and the local equity market rallied. However, the Aussie lost some ground late in the Asian session, dipping back to 0.8970 after the Bank of Japan's announcement to boost funding facilities was not viewed by the market as doing enough to curb the Yen's dramatic advance. The Aussie hit an overnight low of 0.8916 and opens near this level this morning. Attention will turn to domestic events this week with current account data today and the release tomorrow of second quarter national accounts which is expected to show a small increase in growth compared to the previous quarter. The AUD remains strong against the Euro (0.7035) and the New Zealand Dollar (1.2600).

- We expect a range today in the AUD/USD rate of 0.8900 to 0.8960

:: Great Britain Pound: Pound Sterling opens lower today against the greenback today at 1.5450. Due to London markets being closed to mark summer bank holiday, trading was fairly subdued and the currency drifted down towards an overnight low of 1.5455 as U.K. house prices slipped for a second month in August, down 0.3 per cent compared to a 0.1 per cent decline in July. Meanwhile, the pound opens marginally higher against both the Australian Dollar (1.7320) and the New Zealand Dollar (2.1850).

- We expect a range today in the GBP/AUD rate of 1.7280 to 1.7345

:: New Zealand Dollar: The New Zealand Dollar opens lower against the greenback today at 0.7060. During Monday's domestic session the kiwi hung onto its recent gains made last Friday on the back of revived hopes for the US economy. Also supporting the unit above US71 cents yesterday was the release of local trade data which revealed the value of New Zealand's exports continue to rise after a 12 per cent increase in July to NZ$3.6bio. The trade balance came in at a deficit of NZ$186mio for July which was much lower than the average deficit for the same month over the last five years. During offshore trading action the kiwi followed the Australian Dollar and the Euro lower all the way down to this morning's opening level.

- We expect a range today in the NZD/USD rate of 0.7050 to 0.7090

:: Majors: The greenback has fallen sharply against the Japanese Yen and opens this morning in Sydney at 84.52. The Yen advance was precipitated by the Bank of Japan (BOJ) which expanded its bank loan program amid government pressure to stimulate the economy. The BOJ will boost the amount of funds in the facility by 10 trillion Yen to 30 trillion and said yesterday its action "will encourage a decline in market interest rates and further enhance monetary conditions" The big dollar has slumped from a 24-hour peak of 85.85 as the size of the stimulus disappointed some analysts and may not be enough to halt the Yen's ascent. In US economic data, incomes rose only 0.2 per cent in July fuelling fears of slower spending in the months ahead. Meanwhile, the Euro opens lower today at 1.2660.

:: Data Releases: