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John from Moneycorp

Australian Dollar Update -06/12/2011

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The Aussie added more than four cents against sterling over the week. Most of the gain came at lunchtime on Wednesday, after six central banks announced they would lend US dollars more cheaply to banks. After weeks of fretting about the lack of action to resolve Euroland's debt crisis, investors were impressed to see that somebody was doing something to set matters in order. Even though the central banks were responding to a liquidity problem in the wholesale market, not to Italy's inability to borrow money, anything at that level was better than nothing.

It was optimism about Euroland rather than the strength of the Australian economy that took the AUD higher. New home sales in October rose by 5.5% on the month but only after a -3.5% decline in September. Retail sales growth slowed to 0.2% and the manufacturing purchasing managers' index remained in the shrinkage zone at 47.8.

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