Forex

The Australian dollar opened more than half a US cent weaker on Wednesday, pushed down by renewed demand for the US currency and a further slip in commodity prices.

At 7am (AEDT), the local currency was trading at US73.35¢, a sharp fall from Tuesday's close of US73.93¢.

During overnight trade, it hit a high of US74.09¢ and a low of US73.17¢.

The Australian dollar opened significantly weaker on Tuesday as falling commodity prices and a narrowing interest rate spread with the US weighed on the local unit. At 7am (AEDT), the local currency was trading at US74.04¢, almost three quarters of a US cent below Monday's close of US74.72¢. During overnight trade, it hit a high of US74.71¢ and a low of US74¢.

Although the consensus view is to the contrary, the analysts at JP Morgan are voicing the opinion that the Australian dollar will fall to 0.71 against the USD by June 2006 and then fall further to 0.69 by the end of 2006.

This view is based on the assumption that the change of language used by the US Fed shows it is likely to continue tightening interest rates, and as a result Australia’s interest rate advantage is disappearing, the analysts say.

Australian Dollar Opened Weaker Today as investors continued to sell the local currency to support recent yen purchases: At 7am (AEDT), the local unit was trading at US74.30¢, below Friday's close of US74.60¢. In the weekend's trade, it hit a high of US74.79¢ and a low of US74.20¢.

The Australian dollar opened stronger on Thursday, benefiting largely from US dollar weakness as it tumbled on record US trade deficit figures released overnight.

At 7am (AEDT), the local unit was trading at US75.60¢, slightly above Wednesday's close of US75.40¢.

Overnight, it hit a high of US75.36¢ and a low of US75.80¢.

Deutsche Bank foreign exchange strategist John Horner said the local currency benefiting from the US dollar tumble overnight.

The Australian dollar opened nearly one US cent higher on Tuesday as weaker-than-expected US economic figures underpinned the gains.

However, the local unit's moves are expected to be capped by a slew of data releases this week.

At 7am (AEDT), the local unit was trading at US74.30¢, compared with Monday's close of US73.40¢.

Overnight, it reached a low of US73.23¢ and a high of US74.53¢.

Westpac Bank senior currency strategist Richard Franulovich said the weaker-than-expected US home sales figures boosted the Australian dollar.