Dollar drops below US80c

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Dollar drops below US80c--September 11, 2008 08:32am
http://www.news.com.au/heraldsun/story/0,21985,24328511-5005961,00.html

THE dollar opened lower as a stronger US dollar and softer commodity prices dragged the currency down towards $US0.8000.

At 7am (AEST), the Australian dollar was trading at $US0.7994/98, down from yesterday's close of $US0.8075/79.

At 7.46am, the local unit had dropped to $US0.7968/7973.

Overnight, the local currency traded between a high of $US0.8131 and a low of $US0.8011.

The Australian dollar dropped to $US0.7988 just after 7am AEST, following the Reserve Bank of New Zealand's (RBNZ) decision to cut the country's official cash rate by 50 basis points to 7.50 per cent.

RBNZ governor Alan Bollard said te New Zealand economy has experienced a "marked slowdown", led primarily by the household sector.

He said the weakness in economy activity was expected to translate into lower inflationary pressures in the medium term.

"With medium-term inflation pressures expected to ease, it is appropriate to move towards a less restrictive monetary policy stance," he said.

In trading overnight, the US dollar gained strongly against the euro, with the euro-zone currency this morning dipping below $US1.4000 for the first time since September 20, 2007.

The euro weakened after the European Commission said it expected Spain, the United Kingdom and Germany to suffer a technical recession - two consecutive quarters of contraction.

The Australian dollar again was weighed down by weaker commodity prices overnight, but its move lower against the US dollar was less dramatic compared with the US dollar-euro cross.

Crude oil for October delivery dropped to a five-month low at $US101.36 a barrel on the New York Mercantile Exchange overnight, but settled down $US0.68 at $US102.58 a barrel.

Gold was lower, too, dropping $US29.50 to $US762.50 an ounce for the December contract.

"Commodities prices continue to be soft," ANZ Banking Group senior markets strategist Alex Sinton said from Auckland.

Mr Sinton said the overseas market focus was on the massive third-quarter loss reported by US investment bank Lehman Brothers and declining growth prospects in Europe.

"The Australian performance was, a bit like the New Zealand performance, rather minor," Mr Sinton said.

"The support for the Aussie is sitting around $US0.7980 and resistance is sitting around $US0.8150.

At 11.30am (AEST), the Australian Bureau of Statistics (ABS) releases its August labour force report.

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