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Daily market newsletter: 22nd June 2006   

Australian volatility to continue

The Australian dollar weakened to lows near 0.7340 against the dollar on Wednesday, but recovered in New York with gains back to near 0.74 as the US currency weakened and gold prices strengthened. The Australian dollar pushed to just above 0.74 in local trading on Thursday before edging lower again. There was selling pressure above the 0.74 level and the US dollar recovery also staged a recovery against the Euro.

The Australian currency gained some support on Thursday from a switch out of the New Zealand dollar after a weak New Zealand current account deficit figure, but a substantial impact is unlikely. Offshore trends will tend to dominate and commodity prices will continue to have an important short-term impact. Metals prices, in particular will remain very important for the Australian dollar.

Tightening global liquidity will make it difficult for the Australian dollar to secure strong gains as underlying capital flows will be weaker, but further support is realistic close to 0.7350 against the US currency.

 

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