Australian dollar eases

The Australian dollar eased back from eight-week highs against the US dollar on Monday, after rallying nearly 5 percent last week on the back of an aggressive cut in US interest rates by the Federal Reserve.
But support for the Aussie emerged from a government report which said Australia's income from commodity exports will reach a record A$144.7 billion ($125.8 billion) this business year, buoyed by strong demand from a booming Chinese economy.
The currency rose to a session high of $0.8689 against the US dollar after the central bank said the economy was growing at a strong pace, underpinning views that the Reserve Bank of Australia would maintain a tightening bias in the near term.
Firm commodity prices and a widening interest rate advantage had combined to lift the Aussie to 87.04 US cents on Friday. "The US will keep cutting interest rates, weighing on the US dollar and helping the Aussie benefit from a wider yield advantage and improved investor risk-appetite, encouraging a return of the leveraged carry trade," said John Kyriakopoulos, currency strategist at National Australia Bank.
"Also, we have revised up our commodity price forecasts for 2008. Our previous profile had commodity prices falling modestly through 2008 but we now expect them to remain elevated."
The Australian dollar was quoted at $0.8672/74 against the US currency, down from $0.8693/98 in late trade here on Friday. The US dollar dipped to a 15-year low against a basket of currencies and struck a record low against the euro as anxiety about the US economy and the future path of interest rates saw it being dumped by investors.
Analysts say the outlook for yet lower US rates would make it harder for the world's largest economy to fund its trade deficit, with foreign lenders demanding higher premiums on their loans.
The Aussie eased from six-week peaks against the Japanese yen, but as riskier assets returned to find favour, investors were keen to borrow in the cheaper yen to buy higher-yielding currencies. Activity was subdued with Tokyo closed for a public holiday. The local currency was at 99.74/84 yen, below 99.85/95 yen late on Friday and off a six-week peak of 100.17 yen also struck on Friday.