Interpac Business and Migration Solutions Melbourne Australia

(October 12, 2010)

THE dollar was slightly lower at noon, as investors continue to speculate about a possible US quantitative easing program.

At noon (AEDT), the dollar was trading at US98.09c, down a touch from yesterday's close of US98.50c.

Since 7am yesterday, the local unit traded between US98.76c and US98.09c.

Trading was thin during yesterday's offshore session with US and Japanese markets closed for national public holidays.

Nomura Australia chief economist Stephen Roberts said the Aussie was lower as investors continued to speculate over the chances US policy makers may restart a quantitative easing program.

"The Aussie is back a bit through course of the day, so we have had some to-ing and fro-ing with the US dollar" he said.

"The market is anticipating quantitative easing."

Quantitative easing is where the US Federal Reserve buys up US treasuries to increase the supply of money in the economy.

The Fed used the same program during the worst of the global financial crisis and last month hinted it stood ready to restart the policy.

Speculation over when it will start has driven market sentiment, in the absence of hard economic data, over the past few weeks.

Meanwhile, the Australian bond market was firmer at noon.

At midday on the Sydney Futures Exchange, the December 10-year bond futures contract was at 94.980 (implying a yield of 5.020 per cent), up from 94.975 (5.250 per cent).

The December three-year bond futures contract was at 95.110 (4.890 per cent), up from its previous close of 95.090 (4.910).

(Source: theAustralian)