Australian Rates on Hold at 4.25%, Record Aussie Dollar

Marcus Jacob
07 Feb, 2012
New York City

Reserve Bank of Australia left its key lending rate on hold as the mining sector revs up spending and inflation remains within the target range. The Australian dollar rose to a record high against the euro and 27-year high against the UK pound. Cochlear jumped on lower than expected annual loss.

[R]8:00 PM Sydney – Reserve Bank of Australia left its key lending rate on hold as the mining sector revs up for capital spending and inflation remains within the target range. The Australian dollar rose and traders set expectations for $1.10 level. Cochlear jumped on lower than expected annual loss.[/R]

Australian stocks traded lower after Reserve Bank of Australia left its key lending rate on hold at 4.25% after lowering rates for two times in a row.

RBA chief Glenn Stevens cited improving economic data in the U.S. and “progress in alleviating the financial pressures in the euro zone” and domestic inflation within the target range.

Stevens said inflation in the year 2011 was 2.5%, within the range of 2% and 3% and prices may soften in the first half of 2012. He added if demand weakens materially, “the inflation outlook would provide scope for easier monetary policy.”

The ASX 200 index fell 21.8 or 0.5% to 4,274.2 and All Ordinaries index decreased 19.7 or 0.5% to 4,344.9.

The Australian dollar rose to $1.082 but settled at close to $1.0782 after the RBA left its key lending rate unchanged. The Aussie dollar jumped to a six-month high against the U.S. dollar and traded at 68.3 pence, 27-year record against the UK pound and a new high of 82.38 cents against the euro.

In trading, turnover increased to 1.84 billion shares worth $4.65 billion compared to $1.77 billion worth $4.2 billion on Monday. Of the shares changing hands, 460 shares increased 528 decreased and 382 closed unchanged.

Stock Movers

BHP Billiton Ltd fell 31 cents to $37.90 ahead of its financial results tomorrow and Rio Tinto Ltd closed down $1.29 to $71.01.

Switzerland based Glencore International agreed to acquire London listed Xstrata for 39.1 billion pounds in the largest mining industry merger. Glencore valued the Xstrata at 1,290 pence a share and it will control 55% of the newly merged entity Glencore Xstrata International Plc. The combined entity will have $209 billion in revenues and will rival with the two largest Australian mining giants.

Fortescue Metals Group decreased 10 cents to $5.26, Lynas Corporation Limited closed lower 6 cents to $1.38 and Iluka Resources decreased 36 cents to $17.79. Newcrest Mining fell 38 cents to $33.54.

Oil Search Limited closed unchanged at $6.47, Santos Limited rose 10 cents at $13.76 and Woodside Petroleum was flat at $34.41.

Cochlear soared $4.41 or 7.6% to $62.52 after the maker of bionic ear devices reported 2011 net loss of $20 million compared to net profit of $87.2 million a year ago. The loss in the year was driven by the cost of more than $100 million to recall its faulty Nucleus C1500 devices.

Commonwealth Bank of Australia decreased 33 cents to $50.51 and ANZ added 3 cents to $21.36 and Westpac inched lower 11 cents to $20.92. National Australia Bank declined 96 cents to $23.21.

David Jones Limited decreased 5 cents to $2.51 and Harvey Norman Holdings closed up 2 cents to $2.09. Wesfarmers Limited rose 8 cents to $29.54.

Qantas Airways Ltd was unchanged at $1.62, Virgin Australia rose 1.5 cent to 35.5 cents and Flight Centre increased 5 cents to $19.75.

QR National closed down 1 cent to $3.74.