Rates At 0530 GMT
Latest Change
AUD/USD 0.9840 +1.52%
AUD/JPY 76.404 +1.83%
6.5% May, 2013 3.1686% +0.0332
4.5% Mar, 2020 3.7935% +0.0213
10-Yr Spread To U.S. +189 bps -13 bps
SFE Dec 3-Year Futures 96.92 -0.05
SFE Dec 10-Year Futures 96.08 -0.035
SYDNEY (Dow Jones)-- The Australian dollar traded higher Monday, bouncing back from a steady stream of November selling, though the currency gave up some of its earlier gains after people familiar with ongoing talks on the euro-zone debt crisis said reports of an International Monetary Fund package for Italy weren't credible.
Both the Australian and New Zealand currencies received a boost early in the day after Turin daily, La Stampa, citing IMF sources, reported that the IMF was extending a EUR400 billion to EUR600 billion credit line to Italy. However, both currencies immediately lost ground later after Dow Jones Newswires reported that the La Stampa report wasn't credible, citing people familiar with ongoing international discussions on the debt crisis.
"Great news if the IMF does punch in with 600 billion euros, (as) that will take the pressure off the incumbent government," said David Greene, senior corporate foreign exchange dealer at Western Union. "But if it doesn't happen, we're going to be in an ugly situation."
At 0530 GMT, the Australian dollar was trading at US$0.9840, up from US$0.9693 late Friday. The Australian dollar began November at US$1.0580. Against the yen, the currency changed hands at Y76.404, up from Y75.03 Friday.
Joseph Capurso, a currency strategist at Commonwealth Bank of Australia, said that concerns remained for the Australian dollar even if there was a potential IMF boost for Italy. He forecasts a rebound for the Aussie this week but notes that a new uptrend for the currency was unlikely.
"I think there is a bit more upside this week, though the IMF lending to a G-7 economy makes it difficult to think the Aussie could get real traction," said Capurso, who tipped resistance at US$1.0131.
A spokesman for Treasurer Wayne Swan said that much of the market's focus, particularly in the bond market, would be on the Australian 2011-12 Mid-Year Economic And Fiscal Outlook to be published some time this week.
Swan is expected to wield the axe on spending when he announces the mid-year review of the government's budget, keeping alive a key election promise to produce a surplus by 2012-13. The worsening outlook for the euro zone and a patchy local economy is expected to force significant spending cuts, with the government already warning that weaker share markets will lower capital gains tax returns by an estimated A$7 billion over the next four years.
Market strategists say that Australian bonds would see buying interest if Swan keeps his commitment to work toward a surplus budget.
-By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com
