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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (32072)	4/18/1999 3:38:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116779

$A gains currency with market herd By Tony Boyd, Global Markets Editor The financial market herd that pummelled Asia, pulled the plug on Russia and almost tipped Latin America into crisis has turned its sights on the Australian dollar. But instead of a selling wave similar to the one that made the Reserve Bank buy $5.5 billion of Australian currency six months ago, the risk this time is that the local dollar will move upwards to US70¢. "On our fair-value models, the appropriate price for the Aussie is about US76¢," said Mr Jim O'Neil, the chief currency strategist at Goldman Sachs in London. Goldman Sachs is one of many international banks that believe the $A will rise to US70¢ within 12 months, on top of its US8¢ rise since October. Deutsche Bank has just advised its clients to lift their weighting in the $A in response to the assumption in financial markets that global economic imbalances are in the process of being corrected. Financial markets have begun to place their bets that the world economy is turning the corner thanks to a bottoming out in the Asian crisis economies, as well as Japan. A critical factor in the more bullish sentiment towards the $A and commodities is the buying support from fund managers in the United States, where greater confidence in the manufacturing sector is being reflected in heavy buying of cyclical stocks. Heavy American buying of Australian resource stocks late last week flowed through into a sharply stronger $A on Friday and market analysts expect further upward re-weighting of foreign exposure to Australia. "If this buying persists for a week, it will be an important turning point because it will be the first time for some years that commodity optimism has expressed itself in the world's biggest economy," said Dr John Edwards, chief economist at HSBC Markets. "This may be a signal that the US has changed its view on Asia and world growth." Dr Edwards said the dollar was being helped by a view among international investors that "Australian equities are very desirable". Another factor behind last week's 2.5 per cent rise in the $A was the break through the technical level of US64.20¢, a move that triggered buying as those caught short retrieved their positions by buying dollars. Mr Bill Evans, chief economist at Westpac Banking Corp, said he expected the dollar to rise to US66¢ by the end of the year but it would not necessarily move in a straight line. He said there was evidence of an upturn in industrial production in the United States, which would contribute to a more positive outlook for commodities. The propensity for markets to look for good news was seen late last week when the release of static global growth forecasts from London-based Consensus Economics was viewed as positive for commodities and cyclical stocks. The Consensus Economics numbers were seen as bullish because they showed that within the space of six months economists in the US have upgraded their outlook for growth from 2 per cent to 3.4 per cent. That points to a strong GDP growth figure in the US for the March quarter, which will be released on April 30. An exception to the consensus for a stronger dollar is Warburg Dillon Read, which forecasts the $A will hit US59¢ by the end of the year. Economist Mr Scott Haslem said there were no signs of an upturn in commodity markets and there were increasing doubts about Australia's economic performance, particularly exports. afr.com.au