Australian Dollar: A strong basket of US economic data overnight has led to further movement away from the safe-haven Greenback and into high-yielding assets such as our Australian Dollar. Soaring to 1.0190 during yesterday’s trade these new 28 year highs have seen the Aussie close out 2010 as the second best performing major currency against the US Dollar, behind only the Japanese Yen. Twelve months ago we opened trade on the 4th of January just below the 90 cent handle at 89.70, unbeknownst as to where the year would take us. Touching yearly lows of 0.8070 in May, the Aussie embarked on a 6mth rally that saw it gain 21 cents and finish 2010 with a 12.8% yearly gain against the US Dollar. We open trade for the last day of the year at 1.0160.

We expect a range today of 1.0110 – 1.0200

New Zealand Dollar: Strong risk sentiment has succeeded in pushing the New Zealand Dollar back above 77 cents, reaching highs of 0.7720 overnight off the back of favourable US data. Looking back at the performance of the Kiwi over the past twelve months, the recovery of the US economy has driven the commodity currency to an overall gain of 6.5% against the Greenback for 2010. Starting the year at 0.7200, we saw lows of 0.6560 in Jun/Jul and highs of 0.7970 at the beginning of November; opening new years eve trade today at 0.7710. Against its antipodean counterpart, the Kiwi has finished the year 4.9% lower. Opening the year at 0.8080, we have seen yearly highs of 0.8264 (July) and lows of 0.7400 (December) and we open today at 0.7590.

We expect a range today of 0.7660 – 0.7740

Great British Pound: The Pound Sterling has weakened against all 16 of its most traded peers overnight as house prices fell 0.6% in November and economists are predicting further falls next year. Hitting seven week lows against the Euro, the Pound touched 86.33 and also fell to 1.5370 against the US Dollar. Sterling has traded a 7.8% loss over the course of the year against the US Dollar, according to the Bloomberg correlation-weighted currency indexes, opening in January at 1.6150 but now trading this morning at 1.5420. The Pound also lost significant ground against the Antipodeans, starting the year at 1.8000 against the Aussie Dollar and 2.2300 against the Kiwi, only to open today at 1.5160 and 1.9990 respectively.

We expect a range today of 1.5100 – 1.5230

Majors: The US economy appears to be heading into the new year on full steam as jobless claims fall to 2-year lows, the Chicago PMI index indicates that businesses are expanding at the fastest pace in two decades and pending home sales increased once again. This basket of information has underscored an increase in demand for higher-yielding assets and led to further decline in the US Dollar. The Euro staged a rally against the Greenback, pushing through 1.33 but fell back to open the last day of trade in 2010 at 1.3285. A year clouded by debt concern for the Euro-zone and many of its members has seen the Euro be the worst-performing major currency against the big dollar in 2010. Starting the year at 1.43, the Euro failed to reach these levels again and has depreciated 7% to today’s open. In contrast, the Japanese Yen has been the best performing major currency against the Greenback, with the Asian region a strong performer this year. Opening at 93.00 twelve months ago, the Yen has appreciated 13.8% and soared to highs near 80.00 in Oct/Nov. US Dollar weakness sees the Yen open today 81.50.

Data releases

AUD: Private Sector Credit m/m

NZD: No data due for release

JPY: No data due for release

GBP: Nationwide HPI m/m

EUR: No data due for release

USD: Treasury Currency Report

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