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Daily FX Commentary

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Daily FX Commentary

Mon, Feb 2 2009, 12:56 GMT

Investica Ltd


RBA decision key for Australian dollar

The Australian dollar was unable to gain any traction on Friday and weakened to lows near the 0.63 region against the US dollar as global economic fears continued to increase.

Australian house prices and sales continued to decline according to the latest domestic data with new home sales declining by 1.7% in December after a revised 4.1% decline the previous month. Although the direct impact was limited, there were expectations that the Reserve Bank would cut interest rates more aggressively at this week's policy meeting.

The Australian currency was again undermined by a general deterioration in risk appetite on Monday as global growth fears intensified. In particular, confidence in Asian prospects has continued to weaken.  Markets are expecting Australian interest rates to be cut by 1.00% at the latest policy meeting. Confidence will remain very fragile in the short term, especially if there is a depressed reading for the US ISM manufacturing report.


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Investica Ltd http://www.investica.co.uk | tim.clayton@investica.co.uk

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