AU: Feisty dollar cracks new euro high

A feisty Australian dollar tore to a fresh all-time high on an embattled euro as Europe's debt crisis looked no nearer a resolution and outshone other major currencies on renewed appetite for riskier assets. The dollar extended gains to a record high of 79.29 euro cents, its fifth straight session of all-time highs. It has gained more than 2 cents in just one week, with technicals pointing for further gains. "Arguably the market is now largely prepared for the negative consequences of the European debt crisis and a weaker growth impulse from Europe," said Greg Gibbs, a strategist at RBS. "There is scope for some improvement in high-beta currencies including the AUD and many Asian currencies."

Buoyant equities, with Korean and Australian stocks up more than 1 per cent, lifted the Antipodeans against the US dollar, Swiss franc, yen and pound. The Aussie last stood at $US1.0299, more than a cent higher from Friday in late local trade, before the holiday. A rise in China's official PMI contributed to the general upbeat mood in Asia. A stronger-than-expected reading of 50.3 in December, up from 49 in November, combined with the prospect of more monetary easing, helped offset worries about a sharp slowdown. Australian bond futures ran into some profit taking given the 10-year contract ended at a record high of 96.280 on Friday.

It was last at 96.120, down 0.155 points, while the 3-year contract eased 0.14 point to 96.780. Strong demand from offshore investors for Australia's triple-A rated debt and expectations of further cuts in rates here have been underpinning Aussie bonds. Markets will focus on US ISM manufacturing later on Tuesday where an improvement to 53.2 is expected from November's reading of 52.7. It will be followed by the release of the FOMC Minutes where investors will look for signs of another round of quantitative easing.

Source: smh.com.au