FX DAILY REPORT

WEDNESDAY JULY 6 2011

Bell FX Currency Outlook

The Australian Dollar has held its ground despite a softening in risk sentiment overnight in Europe after Moodys downgraded Portugals credit rating.
the last couple of days in modest trading conditions. US markets were closed on Monday because of July 4 Independence Day but before the holiday, Wall Street enjoyed its strongest week in two years, with the Dow surging 5% in five days. Europe's debt worries seemed to be weighing on the markets, with the Moody's ratings agency downgrading Portugal a day after S&P's warning that a proposed rescue plan for Greece could trigger a default. In a sign US industry could be recovering from supply disruptions caused by the Japan earthquake, government data showed that new orders for manufactured goods rose 0.8% in May. The markets will be watching reports due later this week about jobless claims and unemployment for signs of strength in the US economy. Locally, the Reserve Bank of Australia was on hold again yesterday. Qualified is the feeling from yesterdays Statement. Global growth is still expected to be average or above, despite the challenging international environment (which is the qualifier). 2011 GDP forecast has been downgraded but it does still seem that the rate scenario remains unchanged and they are holding the view for rates to eventually go higher but with early 2012 more likely than prior to the end of 2011. The FX markets will look ahead to the labour force data on Thursday to gauge momentum in the Australian economy. In Australia today, there isnt any data due for release.

Australian Dollar / US Dollar

1.10 1.00

Australia: The AUD has consolidated around the USD 1.0700 level in

0.90 0.80 0.70 0.60 Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

Aug-11

Todays Forecast Range

USD 1.0650-1.0730
Currencies AUD / USD USD / JPY EUR / USD GBP / USD NZD / USD AUD Crosses AUD / JPY AUD / EUR AUD / GBP AUD / NZD AUD / CAD Australian Rates Official Cash 3 Month Bill 10 Year Bond US Rates Fed Funds 3 Month Libor 10 Year Bond Commodities Gold (US$ / oz) Oil (WTI) US$/bbl) CRB Index Equities ASX 200 Dow Jones FTSE Hang Seng Nikkei Last 1.0685 81.07 1.4421 1.6062 0.8256 Last 86.65 0.7406 0.6648 1.2939 1.0297 Last 4.75 4.95 5.280 Last 0.25 0.246 3.121 Last 1515.93 96.91 341.63 Last 4598 12570 6024 22748 9972 0.246 3.182 - / + (%) +1.3 +2.1 +1.46 - / + (%) +1.4 -0.1 +0.1 -0.1 +0.1 4.97 5.28 Previous High 1.0747 81.19 1.4553 1.6128 0.8326 High 86.90 0.7419 0.6681 1.2973 1.0320 Previous Low 1.0664 80.71 1.4396 1.5991 0.8234 Low 86.48 0.7367 0.6636 1.2860 1.0258

Majors: The USD was steady as news out of Europe indicated the debt crisis in the Euro Zone is far from over. The positive news out of Greece last reduced the risk of a default but now we have Moodys decision to cut Portugals credit rating four notches to junk status Ba2 with negative outlook to take into account. Moodys also warned that banks rolling over Greek debt might have to take impairment charges, and this would undermine their balance sheets. This followed S&Ps warning on Monday that the debt rollover plan proposed by French banks, if adopted, could constitute a selective default. Potential contagion spreading into other peripheral European economies remains, so caution returns and the markets will also look at the US employment data on Friday very keenly.
Economic Calendar 6 JULY US ISM Non-Manufacturing Composite JUN US Mortgage Applications GE Factory Orders MAY JPN Leading Index MAY

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