Big Selling Order Kills Off Rally By Dollar
The Age
Tuesday February 4, 1992
The Australian dollar failed to consolidate on a burst of buying support after the release of better-than-expected December current-account figures yesterday, but still finished 19 points higher at 75.12 US cents.
The dollar opened at 75.10 US cents after good weekend buying support out of Europe and then quickly kicked up 12 points to 75.22 US cents after the release of Australia's best monthly current-account figures in four years _ a December deficit of $413 million.
But dealers said the buying quickly subsided after a $100 million foreign sell order and more speculation about the Keating economic package.
``After the initial burst of buying when the figures were released the market did nothing in the afternoon and drifted back to where it opened on the close," one dealer said.
The currency has almost clawed back the entire 1.36 US cents fall it suffered on Friday 24January when it hit a four-year low of 73.90 US cents.
Dealers said most of the recovery had come without the assistance of the Reserve Bank, but any longer-term recovery depended on the content of the Keating statement.
``We are almost back to the levels we were at before the 24th (January), but no one is sure if we can sustain this recovery," a dealer said. ``Uncertainty is still king." Figures showing a 7.1 per cent increase in December building approvals helped buoy currency and money markets initially, until dealers realised the growth was totally confined to the public sector. Private-sector approvals actually shrank 3.4 per cent in December. A small bond rally quickly reversed when this became apparent.
The net effect was a quiet day on credit markets, although weakness in long bonds saw Commonwealth 10-year bond yields jump 15 points to 10.26 on dwindling hopes of further interest rate cuts in the short term.
The Reserve Bank board will meet today, but no change in official interest rates is expected.
© 1992 The Age
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