Australian FOREX Daily Outlook 21/03/2007

CURRENCY TRADING SUMMARY –21 MARCH 07 (23:30GMT)

• U.S. Dollar Trading (USD) was mixed against all other majors on Tuesday, as investors remaining cautious ahead of Wednesday FOMC interest rate announcement. In US share markets, the NASDAQ was up 13.8 points (0.57%) and the Dow Jones also rose by a further 61.93 point (0.50%). Crude oil dropped by US$0.45 a barrel to US$59.25. Looking ahead, as was briefly mentioned the FOMC are scheduled to make an announcement on the interest rate. With investors fairly confident that the figure of 5.25% will remain unchanged, as markets will look to accompanying statements made by Fed officials. With the recent stock turmoil, it is expected that the Federal Reserves bias will in turn shift towards a tighter monetary policy which could weigh on the dollar.

• The Euro (EUR) remained steady against the dollar on the back of little economic data. Overall the Euro traded with a range of a low 1.3271 and a high of 1.3318 before closing the day at 1.3307 in the New York session. Looking ahead, ECB President Trichet will address the EU parliament, where markets will listen attentively for any indication on monetary policy.

• The Japanese Yen (JPY) strengthened against the USD on Tuesday following speculation that the China would stop stockpiling foreign reserves. The USD fell by 0.5% throughout the day whilst the Euro fell by 0.4% against the Yen. In other news the BoJ surprised no one yesterday by keeping their rates unchanged at 0.5%. In accompanying statements, the BOJ made no alteration to their economic outlook, hence adding to the notion that another hike rate could eventuate in Q3. Overall, the JPY traded with a range of a low 116.92 and a high of 118.02 before closing at 117.24 by the end of the New York session.

• The Sterling (GBP) was the biggest mover during Tuesday, on the back of inflation reports adding cause for a future rate hike. CPI data came in better than expected at 0.4% (forecast: 0.3%, previous: -0.8%). Overall the GBP traded within a range of a low 1.9433 and a high 1.9623 before closing at 1.9605 in the New York session. Looking ahead the BoE MPC minutes of the March meeting will be made public today.

• The Australian Dollar (AUD) continues to look bullish, despite investors taking profit during the Asian session of trading. Overall, the AUD traded within a range of a low 0.7965 and a high of 0.8035 before closing the day at 0.8027.

• The Canadian Dollar (CAD) strengthened by 1.2% against the Dollar to reach a 3 week high. Overall, the CAD traded within a range of a low 1.1601 and a high 1.1788 before closing 1.1607 in the New York session. Core Retail Sales is set for release with markets expecting a figure of 0.4%down on the previous 2.0%

• The South African Rand (ZAR) had been the most volatile currency in 2006, is expected to settle down this year according to option traders as the perspective on the global economy was “good enough”. The rand gained 0.6 percent to 7.445 per dollar on March 19, as South African shares rose for a third day.

• Gold (XAU) traded within a narrow range as Crude Oil prices remain steady. Gold rose by US$4.70 an ounce to US$659.00.