Another strong day for the Australian and New Zealand dollars (see below for a report on the Kiwi), but for differing reasons.
The currency closed in Sydney at 87.30 US and the Trade Weighted Index was at an all time high of 70.1.
It hit a high in overseas trading of 87.60 USc before easing to around 87.16 in New York.
That's another 18 year high.
Both currencies are being chased by the yield hungry, but the Kiwi is now subject to more speculation about interest rates. Meanwhile, the Aussie's move well past 87 USc here yesterday is a continuation of the sentiment switch after the Rio bid for Alcan.
The Aussie dipped back below 87 USc in morning trading yesterday after closing at 87.12 in New York on Friday, and then rebounded yesterday afternoon to touch 87.30.
The currency was again very strong against the yen, hitting a 16-year high.
The currency was at 106.34 yen from 106.21 yen in New York. It reached 106.36 yen, matching the high on July 13, the highest since September 1991.
Some analysts are now tipping 87.50 this week; others are asking if it can reach 90 USc later this year.
The yen carry trade is still helping the currency but there seem to have been a change of sentiment after the Alcan bid and investors here and overseas are now waiting to see if BHP Billiton will bid for Alcoa, or its 40 per cent-owned associate, Alumina.
Both bids will give it competition problems in Australia, the US and Europe.
A bid for Alcoa might get through unscathed, if BHP Billiton sells off Alumina, but that would defeat the idea of a large, integrated aluminium producer.
A merged BHP/Alcoa/Alumina would control around 35 per cent of the world alumina market, which might be a bit too much.
Much of the money for Alcoa, like Alcan, would be raised offshore in North American markets and there would be no real selling of Australian dollars for the market to be concerned about.
Cash balances for both companies are held worldwide (both being dual-listed companies in Australia and Britain).
Rio Tinto fell for a second day on concerns thatits $US38.1 billion bid for Alcan will increase its debt, while BHP Billiton Ltd. fell on the back ofconcerns that recent gains have outstripped earnings and disappointment that it had not revealed an immediate bid for Alcoa.
The ASX 200 Index lost 8.60 to 6380.80 at the close in Sydney yesterday.
Rio fell below the $A100 mark to $A97.10, a drop of $A4.20.
ABN Amro cut Rio's stock today to "hold'' from "buy",' saying the Alcan deal doesn't provide a "valuation uplift'' while Citigroup also downgraded the mining giant's shares.
Rio's shares have dropped 8 per cent since the announcement last Thursday.
BHP Billiton fell 96 cents to $A38.20.
But Alumina Ltd added 25 cents to $A8.80 as punters climbed into the stock in the hope BHP will launch a bid shortly.
And the Aussie dollar keeps on powering upwards. When the bust comes, the fall will be just as spectacular.
