Aussie Fell on China’s Outlook Concerns - 20.3.2012

US Dollar The dollar extended losses against its major counterparts yesterday in the evening. The currency’s index fell to 79.88, the lowest since March 9. In Asian trading hours the greenback strengthened slightly against the Australian dollar amid concerns China’s economic growth is weakening, as some large companies reported production in China is slowing and after the government reduced its growth target to 7.5% earlier in March. US Treasuries meanwhile continued falling yesterday. The yield on the benchmark 10-year notes rose to 2.37%, from 2.29% reached on Friday. That was the highest level since the end of October 2011. Yesterday the head of the Federal Reserve Bank of New York, William Dudley, said that the recent signs of improvement of the US economy do not mean the US recovery is not vulnerable to risks, including high oil prices, fiscal cutbacks and a weak housing market. “While these developments [recent improvements in the economy] are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery,” he said. As for the housing market, today investors will be closely watching February’s housing starts and building permits readings. Both figures are expected to show slight increases. Euro The single currency accelerated gains against the dollar and the yen yesterday. Pair EUR/USD rose to 1.3265 after touching earlier 1.3142, while EUR/JPY reached 110.56, the highest level since October 31. Yesterday an auction was held aimed to determine the amount of payouts to the holders of credit-default swaps issued on Greek debt. As a result the sellers will have to pay almost 78 cents on one dollar after Greece completed the restructuring process. In other words the total amount of insurance on 3.2 billion dollars of outstanding swaps will reach 2.5 billion dollars. In Europe there are several macroeconomic reports to be issued today that are worth mentioning. According to preliminary estimations, data from Germany may show producer prices rose at a lower pace in February, decreasing the annualized figure to 3.2% from 3.4%. Another report from Switzerland may show industrial production increased in the last quarter of 2011 from the previous three months. Finally consumer prices reading in the UK will probably indicate lower inflationary pressure in February, decreasing the annual CPI growth pace from 3.6% to 3.3%. Australian Dollar The Aussie was one of few currencies which weakened versus the greenback in Asian trading hours today. The pair fell to 1.0551 after reaching earlier 1.0625. Rumors that China’s economic growth is slowing have put the Australian currency under some pressure. Today the Reserve bank of Australia also published its latest monetary policy meeting’s minutes. According to the minutes, members of the Board noted further improvement in the US and sings of stabilization in Europe. As for the national economy “members noted that while downside risks could still materialize, this seemed somewhat less likely than a few months ago,” the minutes said.