Wednesday April 26, 2006 - 10:22:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Capital doubts restrain Australian dollar
The Australian dollar hit further selling pressure close to 0.7480 against the US dollar and weakened back to 0.7430 before recovering to 0.7460. The headline Australian consumer inflation data was higher than expected with a 0.9% first-quarter increase which took the annual inflation rate to the top of the Reserve Bank's 2.0-3.0% range. The underlying inflation data was mixed, but should ensure a continuing Reserve Bank tightening bias on interest rates.
Commodity price trends will continue to offer further short-term Australian currency support, but volatility will be an important risk and will deter underlying flows into the Australian dollar. While international interest rate trends remain strong, the Australian dollar is likely to hit further selling pressure close to the 0.75 level against the US dollar, especially with reduced underlying capital inflows from Japan.
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