The Aussie dollar ended the week on a solid note and is again within sight of the 91 USc mark and looking to remain around that level.
And while that strength will again be tested by the release of the early monthly report on Chinese manufacturing activity later today – the currency will remain solid.
Going on the performance in the past month, the new data from the Markit/HSBC survey won’t have anything more than a passing influence.
The dollar ended on 90.83c in late trading in the US early Saturday morning. That was higher than a week earlier.
Driving the Aussie currency’s strength were the weakening prospects for further rate cuts in Australia and talk of policy stimulus in China.
In fact this was enough to more than offset the change in guidance from the US Federal Reserve on Thursday morning, our time, which has seen the chance of a rate rise in the US move forward to mid 2015 from 2016.
That helped support the US dollar and sent bond yields higher, but the Aussie dollar resisted those pressures.
But the AMP’s chief economist Dr Shane Oliver reckons that strength is temporary.
He wrote at the weekend that, "Notwithstanding the potential for a bounce in the $A back to around $US0.95 on the back of excessive short positions, the broad trend in the $A remains down reflecting softer commodity prices, a reversion to levels that offset Australia´s high cost base and a decline in Australia´s growth relative to that in the US".
But so far this year, the Aussie dollar is up almost 2% against the greenback, which a situation not many market pundits forecast at the start of the year.
Certainly the Reserve Bank seems to no longer feel the need for a further fall in the dollar.
Last week’s minutes from the March board meeting contained only a passing reference to the currency and its value.
There was no talk of intervention or other concerns about the continuing high level.
Despite the mixed nature of the news flow on Ukraine, US rates and tapering, and commodity prices, plus the continuing credit pressures in China, sharemarkets ended the week on a positive note.
US shares rose 0.7% to 1.5%, Eurozone shares gained 2.6%, Chinese shares rose 2.2% (thanks to a 2.7% jump on Friday) and Australian shares rose 0.2%.
Japanese shares bucked the trend and fell 0.7% in a holiday-shortened trading week.
The renewed focus on Fed rate hike expectations pushed the $US higher against the Yen and Euro, but not against the Aussie.
In the US, the Dow fell 28.3 points or 0.17% on Friday to end at 16,302.77.
The S&P 500 slipped 5.5 points or 0.3% to finish at 1,866.52 and The Nasdaq Composite dropped 42.5 points or 1%, to close at 4,276.788.
For the week, the Dow rose 1.5%, the S&P 500 gained 1.4% and the Nasdaq was up 0.7%.
In Europe, the Stoxx Europe 600 index rose 0.1% to close at 327.91 on Friday, for a week gain of 1.8%.
Germany´s DAX 30 index rose 0.5% on Friday to be up 3.2% for the week, London’s FTSE 100 rose 0.2% on Friday which lifted the index half a per cent higher for the week.
And France´s CAC 40 index was up 0.2% on Friday and closed the week 2.8% higher.
In Asia, the MSCI Asia Pacific Index (excluding Japan) rose 0.9%, trimming the week’s fall to 0.3%. The index is down 1.7% so far in 2014.
The Shanghai market saw a 2.7% rise on Friday, which cut the loss so far this year to 3.2%.
Driving Friday’s gains in China were suggestions the government’s tight credit policy is being relaxed and that new financing avenues might be given the greenlight by authorities, allowing indebted companies to raise much needed new capital.
In Australia our market rose 0.8% on Friday to pull the overall market into the black for the week, with a rise of 0.2%.
The ASX 200 ended at 5338.1 and the All Ords was on 5354.
Metcash shares ended the week down 9.5% after the downgrade in profit slipped out late Friday, and then the reorganisation announced on Friday.
Myer shares lost 9% while David Jones shares closed down 5.5%, thanks to the growing belief the Myer merger won’t happen, certainly not with far better terms for DJ’s shareholders.
Cochlear jumped 4.2% after a new range of hybrid implants were cleared to be marketed.
These can be used by the partially deaf, not just those profoundly deaf which has been most of Cochlear’s target market up to date.
