Dollar recovers early losses as gold continues to tumble
THE Australian dollar fell almost US1? early on, but recovered some losses during a day shaped by concerns about euro zone debt.
THE Australian dollar fell almost US1? early on, but recovered some losses during a day shaped by concerns about euro zone debt.By the end of local trading yesterday the dollar was at US100.90?, down from US101.50? on Wednesday.The Westpac chief currency strategist, Robert Rennie, said the dollar's performance had been driven by movements in the euro."I would categorise the flow through the morning as one of good selling of euro crosses," Mr Rennie said. "[The] Japanese were noted as sellers, and I think that flow certainly weighed on the Aussie [dollar] somewhat."Mr Rennie said the mood brightened as the day wore on as this trend subsided and Asian equity markets rallied.Despite a generally quiet news day, Mr Rennie said the announcement about an increase in the European Central Bank's balance sheet was closely watched."With the ?239 billion ($306 billion) rise in its balance sheet, it's up now about 42 per cent in six months," he said. "Lending to euro-area credit institutions is also up by 97 per cent over that period, and securities held by the ECB for monetary policy purposes is up 103 per cent."We're seeing very significant changes in the ECB's balance sheet."Essentially, this is quantitative easing by any other name, and I think that was weighing on the euro and euro crosses yesterday."Meanwhile, the price of gold is continuing its fall from grace, hitting $US1555.60 an ounce in Sydney yesterday, down $US32.41 an ounce.The goldminer Newcrest slumped to its lowest point since September 2009 as investors feared the yellow metal may be headed for further falls. The stock closed at $29.84, down 3 per cent."Gold looks pretty ugly right now, and a break of the September low of $US1532 would suggest a much deeper pullback, despite a strong fundamental story," said IG Market's Chris Weston. "The selling in gold stocks suggests traders are already contemplating this fate."