Australian dollar closes weaker
With negotiations going on over the $700 billion rescue plan in the US legislation, Australian dollar close flimsily. While throughout the afternoon the currency was found trading over the mark of US$0.8350, as the Berkshire Hathaway announced its decision of buying US$5 billion stake in major investment bank of US Goldman Sachs.
Another push behind the high-yielding units is the Reserve Bank of Australia’s pronouncement of temporary setting of currency exchange facility by joining four other central banks.
Around 1700 AEST, Australian currency was down from its previous close of 0.8399/03 as it traded at US$0.8383 86, whereas in the morning the currency was found trading between US$0.8290 (early morning low) to US$0.8397 (mid-morning high).
As US congress consulted over the $700 billion plan of buying toxic debts unveiled by Bush administration, Australian currency was found struggling to breach or burst through the closing level of previous day, on the day of optimistic risk appetite.
Christopher Dodd, chairman of the US Senate committee on banking, housing and urban affairs, called the rescue plan is conspicuous as well as unique in terms of the scope and the shortness of specifications. After the committee attended the testimony from Henry Paulson (US Treasury secretary) and Ben Bernanke (Federal Reserve), Dodd said that the committee is not in mood to accept the proposed plan sent by the administration.
According to Robert Rennie, chief currency strategist at Westpac, economical markets are seeing the remarks by US legislators as a huge break before the congressional elections to be held in November. He added that politicians will now use the whole statement thing as a way to earn fame during campaign for the future elections.
Berkshire Hathaway decided to spend US$5 billion US$5 billion in the Goldman Sachs, as it perked up risk appetite.
In order to set up a short-term currency exchange facilities for handling the weighing pressure in the USD funding zone, Reserve Bank of Australia (RBA) tied itself with four other central banks, which includes Swedish, Norwegian, Fed and Danish central banks.
Robert Rennie also said that risk appetite has been eased down with the determination and coordination of central banks, in the situation of liquidity.
With the Federal Reserve chairman Ben Bernanke’s testimony talking down the economy of US in front of Congressional economic committee, it was anticipated that the Australian currency would trade over the mark of US$0.8400.