Forex - US dollar slightly lower in Sydney morning trade

Forex - US dollar slightly lower in Sydney morning trade

	Published : Thu, 27 Sep 2007 02:22 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar was slightly lower against other major currencies in Sydney morning trade Thursday, moving in tight ranges, with the greenback's downside limited by increased risk appetite which has spurred carry trade activity, putting the yen under pressure.

At 10.30 am (0030 GMT) the dollar was quoted at 115.49 yen, down from 115.74 yen in late New York trade. The euro stood at 1.4126 dollars, up from 1.4125 dollars. The euro struck a record at 1.4162 on Wednesday.

NAB Capital Markets currency strategists said stronger equity markets and steady US yields are helping the dollar move off record lows against the euro, while the United Arab Emirates' announcement that it will keep its currency pegged to the dollar also helped.

The key interest is yen-funded carry trade activity, which is continuing to propel high-yielding currencies such as the Australian dollar higher.

In carry trades, investors borrow in low-yielding currencies like the yen and Swiss franc and invest in higher-yielders like the Aussie and New Zealand dollars and the euro.

But NAB said the US dollar's recovery against the euro was capped by comments overnight by German Finance Minister Peer Steinbrueck, who said he prefers a strong euro to a weak one. Steinbrueck described the European economic outlook as 'robust', with the region less susceptible to a decline in the US economy.

The Australian dollar is now within sight of its 18-year high of 88.71 US cents struck on July 25. This morning it was trading at 87.54 US cents.

John Noonan at Thomson IFR said the Australian dollar was the star currency overnight, rising as high as 87.70 US cents.

He said another strong close on Wall Street Wednesday indicates that risk appetite is returning to pre-subprime meltdown levels despite signs of ill health in the US economy.

'The buoyant mood continues to support the yen-funded carry trades, with the high-flying Australian dollar the major beneficiary of late,' Noonan said.

While the market stays in this mood the Australian dollar appears headed towards a retest of its July high, he said.

Sydney 10.30 am (0030 GMT)

US dollar

115.49 yen

1.1703 sfr

Euro

1.4126 usd

163.15 yen

1.6532 sfr

0.7014 stg

Sterling

2.0142 usd

232.69 yen

2.3569 sfr

Australian dollar

0.8754 usd

0.4345 stg

101.10 yen

New Zealand dollar

0.7443 usd

bruce.hextall@thomson.com

bhx/jm/cl

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