High prices in Europe drive up dollar

The Australian dollar was stronger at noon as high European price increase figures enhanced demand for risk appetite-driven currencies.

Rather than preventive growth, the European data proposes that the US sub-prime calamity is not affecting on other financial systems as much as alarmed before.

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About 12pm, the Australian dollar was doing business at $US0.9368/72, high from pervious day close of 0.9285/89.In the morning, the unit traded between a low of $US0.9366 and a high of 0.9397.

The Australian dollar hit a four-week high of $US0.9402 overnight after price increase in Eurozone consists of the 15-member financial systems, was reported to have gone up by 3.6% in the year by March.


The uppermost consumer price index (CPI) reading since the euro started trading in 1999 abridged the outlook of the European Central Bank less rates from their current level of 4%, which in turn caused the US dollar to drop.

The Australian dollar gained more strength after data released overnight demonstrated the US CPI rising by 0.3% in the March quarter for a yearly mount of 4%.

This influenced the market that a 50 basis point cut to US interest rates, now at 2.25%, was more likely on April 30 even though fixed interest markets have been downwardly modifying their hope of a monetary policy calming in the past month.

The Australian dollars was still firmer, while off its morning highs at noon ,against the Japanese yen, the euro and the British pound.

National Australia Bank currency expert John Kyriakopoulos said the high European price hike figures assisted riskier currencies as dealers viewed that the US sub-prime crisis would be likely to persuade the rest of the world less than expected earlier.

Mr Kyriakopoulos said, during the past month, the market had reduced its pricing for a US price cut in April that destined the Australian dollar was gaining force from vigorous risk craving more than US currency flaw.

In the absence of chief household economic data today, the Australian dollar flowed from its morning highs in the lead-up to midday but the currency is tending to acquire support over $US0.9350 in afternoon trade.

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