Dollar has tight day on European debt concerns

THE Australian dollar has moved little following mixed news around the Eurozone debt crisis and the Greece bailout package, and the surprise European Central Bank interest rate cut.

THE Australian dollar has moved little following mixed news around the Eurozone debt crisis and the Greece bailout package, and the surprise European Central Bank interest rate cut.

At 1200 AEDT today, the Australian dollar was trading at 103.92 US cents, up from 102.48 cents on Thursday.
Since 0700 AEDT on Friday, the local unit traded between 103.86 US cents and 104.40 cents.

Commonwealth Bank currency strategist Joseph Capurso said the Reserve Bank of Australia's announcement on monetary policy had haed little impact on Australian markets.

"The Aussie's really been moved up and down by investor sentiment related to Europe rather than interest rate cuts,'' he said.

"Markets had already factored in that the RBA would be cutting their GDP (gross domestic product) and inflation forecast, at least in the near term, but they haven't changed their long-term one that much.''

Today, the RBA announced an inflation outlook of 2.5 per cent in 2012, half a percentage point below its forecast three months ago.

Concern around Europe's unresolved debt crisis was key to this decision, Mr Capurso said.

"The RBA identifies Europe as the major downside risk to the Australian economy, so if it were to get a lot worse over there, then rate cuts would be back on the agenda,'' he said.

World markets rebounded after Greece's prime minister, George Papandreou, indicated he would not hold a referendum on the nation's debt bailout package.

Mr Capurso said that the announcement US non-fund payrolls also would influence the Australian dollar overnight.

"I think we might get 150,000 jobs being created rather than the 95,000 that the market's prepared for,'' he said.

"If that were to happen, you'd see equity markets rise, you'd see commodity prices rise, and that would push up the Aussie dollar. So, that's the main risk for the next 24 hours.''

Meanwhile, Australian bond prices were lower at noon.

At 1200 AEDT on Friday, the December 10-year bond futures contract was trading at 95.660 (implying a yield of 4.340 per cent), down from 95.750 (4.250 per cent) on Thursday.

The December three-year bond futures contract was at 96.320 (3.680 per cent), up from 96.390 (3.610 per cent).