The Australian dollar has remained at its 24 year high well above 95 US cents for 24 hours or more for the first time as traders contemplate the outlook for the currency.
Even though news of the breakout above 95.50 US cents didn’t hurt stockmarket sentiment yesterday, there was more than enough chat about the currency’s appreciation to signal that the value of the dollar will be a major concern for many businesses for months to come.
But for the likes of Woodside Petroleum and Santos, both of whom have seen export returns clipped by the strong dollar, no such concerns yesterday.
They are the country’s second- and third-largest oil and gas producers and both hit records in trading yesterday as oil prices continued above $US126 a barrel. They finished at a record $US127.05 in New York this morning, the first close over the $US127 level.
Traders rejected the move by Saudi Arabia to expand production from next month by 300,000 barrels a day.
Woodside, rose as much to a all time high of $70.20 before closing 10%, or $6.30 higher at $69.50, a record close for the stock.
Santos rose by more than 9% to $20.19, before ending 6.8% up at %19.76.
Oil Search also hit a record of $6.40 and other oil and gas stocks were also higher.
Oil prices have been boosted by higher forecasts from the likes of Goldman Sachs ($US141 a barrel) and UBS which last week boosted its 2008 forecast for West Texas Intermediate, the benchmark American crude, by 32% to $US115 a barrel and its 2009 and 2010 forecasts by 54% and 53% respectively.
It lifted its 12-month share price forecast for Woodside by 16%, by 24% for Santos and by 18% for Oil Search.
Woodside’s moans about the equalising of the tax on condensate with the tax on gas produced from the North West Shelf have been made to look a little foolish with the sharp rise in crude prices and the WPL share price.
With the Aussie trading around 95.5 US cents, the currency is up around 8.5% so far in 2008.
But the New Zealand dollar is becoming weaker as the chances of a rate cut grow with every statistics that emerges from across the Tasman.
The Kiwi economy is slumping towards recession: consumer confidence fell; exports are lower, house sales and retail sales likewise.
Unemployment is down and the economy is starting to look in need of a rate cut, hence the drop in the value of the Kiwi.
New Zealand’s currency fell to 77.14 US cents compared with 77.41 cents late last week.
New Zealand’s dollar has depreciated 6% since reaching 82.13 US cents on March 14, the highest since it was allowed to trade freely in 1985; the Aussie dollar continues to appreciate, meaning lower returns for those Aussie companies operating there.
Bloomberg reported that investors, BlackRock and DWS Investment GmbH, part of Germany’s largest bank, Deutsche Bank, said they sold the New Zealand dollar as home sales slumped to a 16-year low in April and employment fell the most since 1989.
Citigroup reckons the Kiwi will get "roasted” after a 3% fall in the past two months. Lehman Brothers forecasts a 17% drop by the end of this year.
