DESPITE the failure of European leaders to agree to a crucial Greek debt deal this week, Australia's sharemarket still recovered most of last week's losses.
It is now back above 4400 points, helped by evidence that US and Chinese growth has picked up.
Meanwhile, the dollar made headlines after the International Monetary Fund said it was thinking about giving the currency a higher profile in central banks' reserve data.
For the week, the benchmark S&P/ASX 200 Index rose 76.2 points, or 1.7 per cent, to 4413 points, while the broader All Ords gained 71.4 points, or 1.6 per cent, to 4431.5.
The IMF said the dollar might soon be listed as its own entity in central bank holdings, joining a group of reserve currencies that include the US dollar, euro, yen, pound and Swiss franc.
Reserve Bank governor Glenn Stevens said such a move would have little material effect.
But it still got people talking about the strength of the dollar, which is one of the five most traded currencies in the world.
In the past three weeks, the dollar has traded between US102.87? and US104.80?, and currency strategists said its emerging status as a "reserve currency" could explain why it has been trading in such a tight range.
"There's a theory going around that the presence of central banks in the market basically 'top and tail' any big price movements in the Australian dollar," ANZ foreign exchange strategist Andrew Salter said.
"The Aussie has been an increasing part of central bank portfolios, that's one of the big stories of 2012, and when central banks add it to their portfolios they have to rebalance their portfolios on a daily or weekly basis to keep the value of their portfolios within the risk limits that are dictated by their mandate," he said.
That means if the dollar appreciates, its value in central bank portfolios goes up, and they have to sell Australian dollars.
"So if the Australian dollar goes up, they sell, and if the Australian dollar goes down, they buy, so it compresses the price action."
Meanwhile, energy stocks were lower on Friday, with Santos shares falling 11? to $10.94.
Beach Energy shares fell by 3.5? to $1.40 after the oil and gas producer said its Cooper Basin operations were going well as it increased its $400 million growth phase.
Leighton Holdings fell 20? to $16.88 after its former finance manager pleaded guilty to stealing more than $20 million from one of Australia's largest construction and infrastructure companies.
David Jones slipped 1? to $2.43, as the company's outgoing chairman, Bob Savage, said recent interest rate cuts had yet to work their magic on consumers.
AVJennings remained steady at 30?, after the residential property and housing developer said it would put more new homes on the market on signs of improvement after a difficult year. With AAP
Frequently Asked Questions about this Article…
How did the Australian sharemarket react after European leaders failed to agree on a Greek debt deal?
Despite the lack of a Greek debt deal in Europe, Australia's sharemarket recovered most of the prior week's losses and climbed back above the 4,400 level. For the week the S&P/ASX 200 rose 76.2 points (about 1.7%) to 4,413 points and the All Ordinaries gained 71.4 points (about 1.6%) to 4,431.5.
What role did US and Chinese growth play in the Australian market recovery?
The article says evidence that US and Chinese growth had picked up helped the Australian market recover, supporting investor sentiment and contributing to the weekly gains in the S&P/ASX 200 and All Ordinaries indices.
What did the IMF say about the Australian dollar and why does that matter for investors?
The IMF indicated it was considering giving the Australian dollar a higher profile in central banks' reserve data—potentially listing it as its own entity alongside major reserve currencies. Reserve Bank governor Glenn Stevens said such a move would likely have little material effect, but the news sparked discussion about the strength and status of the Aussie.
Why has the Australian dollar been trading in a tight range recently?
Currency strategists noted the dollar traded in a narrow band (between US102.87 and US104.80 in the past three weeks, per the article). One explanation is its emerging status as a reserve currency: when central banks hold the Aussie they rebalance portfolios—selling when it rises and buying when it falls—which can compress price movements, according to ANZ strategist Andrew Salter.
How did energy stocks perform and what happened to Santos and Beach Energy?
Energy stocks were weaker on the day reported. Santos shares fell about 11% to $10.94, while Beach Energy dropped roughly 3.5% to $1.40 after saying its Cooper Basin operations were performing well as it increased a $400 million growth phase.
What caused Leighton Holdings' shares to fall sharply?
Leighton Holdings shares fell around 20% to $16.88 after the company's former finance manager pleaded guilty to stealing more than $20 million from the construction and infrastructure firm, a development that hit investor confidence.
What were the recent moves at retail and housing stocks like David Jones and AVJennings?
David Jones slipped about 1% to $2.43; the company's outgoing chairman, Bob Savage, said recent interest rate cuts had yet to stimulate consumer spending. AVJennings remained steady after saying it would put more new homes on the market in response to signs of improvement following a difficult year.
What should everyday investors watch after these market moves?
Everyday investors should monitor global growth signals (especially US and China), currency developments around the Australian dollar and central bank reserve activity, sector-specific news (energy operations, corporate governance issues), and domestic consumer and housing indicators—each of which helped shape the market moves covered in the article.
Call 1300 880 160
Start a chat
Schedule a call
