Australian Dollar opens one US cent higher
With government of United States of America bailing out leading mortgage firms, Fannie Mae and Freddie Mac, Australian dollar opened over one US cent high. After a close of 0.8175/79 on Friday, the Australian currency was trading at$US0.8279/82 at 0700 AEST, while at 0747, the trading of Australian dollar rose to $US0.8332 8336.
The local currency was seen trading amid a high of $US0.8278 and a low of $US0.8028, over the offshore session of weekend. This is lowest the currency has been to since august 2007.
Danica Hampton, Bank of New Zealand currency strategist, said that over the weekend the market got more focused at the takeover of the mortgage lenders Fannie Mae and Freddie Mac, by government of United States. The mortgage companies own or guarantee almost half of the US mortgage bazaar.
Henry Paulson, US Treasury Secretary, said that rescue of mortgage firms is a move followed to protect financial market of united states from anymore damages, done by weakening and failing mortgages. In next few days US treasury is expected to purchase preferred stock of worth $US1 billion. Paulson added that the takeover plan of mortgage firm is best way to market ad taxpayers from total risk situation caused by existing fiscal condition.
Danica Hampton said that the markets are more or less focused at the mortgage firms, Fannie Mae and Freddie Mac, takeover by government of United States. She also said that US treasury has come up with four-part rescue program including an open-end assurance to offer enough capital necessary to avert falling out of agencies into receivership. She added that following a profit-taking on Japanese cross currency situation, morning witnessed a rebound by Australian dollar. Danica informed that the major situation of the day has been huge run high on dollar/yen as well as a huge purchase of euro/yen and Aussie/yen, due to which the Australian currency was underpinned in the morning.
Hampton said that due to the fear and apprehensions about global economy market is busy selling Australian dollar (high yielding currency) to yen (safe-have currency), last week. Following the global growth fears, last week market got extremely short cross yen. According to Danica, in these conditions support of this level to strengthen financial sector of United States is sufficient to cause a ricochet in risk appetite. She called it an excuse for taking revenues in market and hoped for a continuance in existing market volatility.