Tuesday, December 20, 2005


Aussie Dollar, Gold Tumble

The Financial Review looks at the end of the year prospects for the Australian dollar and gold. "The Australian dollar is losing its grip again as the year end approaches, sliding back toward its lowest levels this year on a combination of a stronger US dollar, weakening gold and base metal prices and expectations of a further narrowing in Australia's interest rate premium."

"The $A lost more than half a cent overnight to reach US73.20¢, its lowest level since late November and not far from the 13-month low of US72.60¢ it plumbed on November 14. The local currency has now lost more than three per cent of its value in the space of a week."

"Pushing the $A lower was another sharp retreat in the price of gold, which sank back below the psychologically key $US500 an ounce mark as speculators who rode it to quarter century highs at $US540 an ounce last week booked profits ahead of the holiday season. Gold was at $US492 late in New York."

"A broadly stronger US dollar didn't help either. The greenback posted solid gains against the euro, yen and Swiss franc after news of stronger-than-expected US housing starts for November was seen as narrowing the odds of the Federal Reserve following up January's anticipated rate rise with another move in March. This would take the benchmark US short-term interest rate to 4.75 per cent, within sight of Australia's official cash rate of 5.50 per cent."

"Analysts say the sharp reversal in the $A in the past week looks to be part of a widespread clearing of the decks by hedge funds ahead of the end of the year, although further losses from here could leave it exposed to a sharper decline."


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