capt_nemo

Dollar hits 2007 high

3/18/2007 5:40:00 PM ET
The Australian


THE dollar opened this morning at its highest level in almost three months as the US currency weakened, commodity prices strengthened and speculation about an interest rate rise lingered.

At 7am AEDT, the domestic unit was at $US0.7933/41, up from Friday's close of 0.7917/22. Overnight it traded between a low of $US0.7878 and a high of 0.7976.

ICAP chief economist Michael Thomas said the local currency opening was equal to the highest level in 2007. The Australian dollar traded at $US0.7961 on January 2.

On Friday, the Reserve Bank of Australia's assistant governor, economics, Malcolm Edey, warned that the outlook for inflation was higher than ideal.

The strengthening local unit overnight was a hangover from Dr Edey's comments which initially sparked a rally on the Australian dollar during Friday morning trade, Mr Thomas said. 'The markets took that as a signal we're closer to a rate hike,'' Mr Thomas said. 'Pushing our local interest rates higher encourages people to put money here.''

Strong industrial prices for commodities such as nickel, copper and aluminium also spurred the domestic currency.

Mr Thomas said support for the Australian dollar would stay strong if data due this week showed a robust US housing market.

The Australian dollar strengthened in line with other currencies as the US dollar weakened on Friday as the market still had its mind on woes in the American subprime mortgage market.

A higher US CPI rate than expected also hurt the American unit, which boosted the Australian dollar, Mr Thomas said. 'People are moving out of the US dollar and into other currencies,'' Mr Thomas said. 'The Australian dollar wasn't the only beneficiary.''

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