FX DAILY REPORT

WEDNESDAY 24TH AUGUST 2011

Bell FX Currency Outlook

The Australian Dollar has opened this mornings session half a US Cent higher on the back of a good night in overseas stock markets and healthy economic data out of China. Australia: We open this morning at USD 1.0510 after the US Dollar was sold off as stock markets rallied on good news out of China and surprise, surprise, Europe. Chinas HSBC flash manufacturing PMI for August came in stronger than expected, rising 0.5 points to 49.8, remaining below 50 for the second consecutive month and suggesting a mild net contraction in activity, which is reflective of credit tightening on small to medium sized businesses. Locally, Reserve Bank of Australias Deputy Governor Battellinos speech implied pretty emphatically that an interest rate easing in September is unlikely and that the Bank would continue to watch the conundrum of a tight labour market in what seems to be a softening economy in an uncertain world. Additionally, rhetoric from Australian Treasury Secretary Martin Parkinson is worth noting. He issued a direct warning to Canberra to facilitate, as opposed to stand in the way of, structural changes the resources boom is forcing onto the Australian economy. Opposing adjustment rarely succeeds, and the negative consequences are significant, according to Parkinson. Labour force implications of the structural change occurring in Australia is becoming a significant challenge for fiscal and monetary policy-makers over the next couple of years, in relation to the extent to which new jobs can offset the loss of jobs in Australias old economy (mainly manufacturing). Australia still seems to be held up as being in relatively good shape by the international markets (some locally would rightly dispute this) but while this is the case, the AUD seems to be well supported. Majors: The US Dollar softened on the news out of China (see above) and Europe, in which data exceeded expectations. Europes release showed economic conditions were still soft with the Manufacturing PMI for the Euro-Zone below 50 at 49.7, slightly better than expected. Market sentiment was boosted by rising hopes the US Federal Reserve will offer new stimulus measures to kick-start the sluggish American economy. Federal Reserve Chairman Ben Bernanke will give a speech to a central bank symposium in Jackson Hole, Wyoming, on Friday (US time). At last year's Jackson Hole meeting, Dr Bernanke announced the second round of economic stimulus by the Federal Reserve. Second tier data out tonight is not expected to influence the FX markets.

Australian Dollar / US Dollar

1.20 1.10 1.00 0.90 0.80 0.70 0.60
Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11

Todays Forecast Range

USD 1.0450 1.0550

Currencies AUD / USD USD / JPY EUR / USD GBP / USD NZD / USD AUD Crosses AUD / JPY AUD / EUR AUD / GBP AUD / NZD AUD / CAD Australian Rates Official Cash 3 Month Bill 10 Year Bond US Rates Fed Funds 3 Month Libor Last 1.0520 76.68 1.4435 1.6460 0.8338 Last 80.70 0.7283 0.6370 1.2611 1.0396 Last 4.79 4.74 4.40 Last 0.25 0.312 2.153 Last 1830.93 85.72 334.43 Last 4173 11177 5129 19876 8733 0.308 2.106 - / + (%) -3.5 +1.9 +0.8 - / + (%) +2.2 +3.0 +0.7 +2.0 +1.2 4.81 4.23 Previous High 1.0534 76.94 1.4500 1.6520 0.8368 High 80.81 0.7295 0.6384 1.2661 1.0411 Previous Low 1.0387 76.48 1.4354 1.6436 0.8214 Low 79.75 0.7232 0.6311 1.2576 1.0288

Economic Calendar 24 AUG

10 Year Bond US MBA Mortgage Applications Aug 11 US Durable Goods Orders Jul US House Price Index Jun Commodities Gold (US$ / oz) Oil (WTI) US$/bbl) CRB Index

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