Records in Australian Dollar and Stocks

123jump.com Staff
27 Sep, 2007
New York City

ASX 200 index gained 0.9% to close at 6,538.10 on a sharp rise in energy and metals mining companies. Mining companies rallied ahead of iron ore price negotiations. BHP Biliton, Rio Tinto, and Fortescue jumped with expectations that iron ore price may be raised by more than 30%. Australian dollar reached a two decade high against the U.S. dollar. Carry traders are exploiting yield differential between the U.S. and Australian short term government bonds.

[R]5:00AM New York, 5:00 PM Sydney – Stocks in Australia jumped to a record close on the dollar reaching eighteen year high.[/R]

In Sydney trading ASX 200 Index gained 0.87% or 56.7 to 6,538.10.

Fortescue Metals Group, BHP Billiton, Rio Tinto and others rose sharply after Merrill Lynch forecasted that iron ore price may be raised by 50% for the next year shipment. The Fortescue jumped 2.4%, BHP added 0.8%, and Rio Tinto increased 1.3%.

The price negotiations begin in two weeks and are likely to be tense as Chinese steel makers may not agree on price increases. The iron ore prices have jumped more than 200% in the last four years. Steelmakers around the world are bracing for higher raw material costs that they have managed to pass to customers. Auto and other appliance makers are bearing the brunt of most of the price hikes. The World''s three largest iron ore importers Rio Tinto, BHP and CVRD of Brazil may seek price hike of 30% as demand from Chinese steelmakers is expected to exceed the ore supply. Australian benchmark shipment iron ore price is at $51.40.

Analysts predict iron prices to remain strong until 2010. Iron-ore miners are expanding capacity but demand growth is outstripping the supply from Australia, Brazil, and Africa. Steelmakers have been able to pass on higher ore prices to its customers. Hot rolled steel price used in making automobiles and household goods is up 11% from a year ago. Demand for iron ore supply is expected to rise at 11% and supply by 8%.

Woodside Petroleum is in a deal to sell to its Mauritania based oil exploration project to Malaysia''s state oil company Petronas for $418 million. The assets included a 47 percent in Mauritania''s only oil-producing project, Chinguetti field, and stakes in areas including Tiof, Tevet and Banda according to the filing with the Australian Stock Exchange. Woodside has sold the assets after it ran into political problems and less than expected oil reserves in the field. Chinguetti has an estimated reserve of 53 million barrels after the figure was slashed in November and its oil field produces 75,000 barrels of oil a day. Woodside stock rose by 0.5% today. The company had earlier announced that it plans to exit all of its operations in Africa. Woodside has explorations projects in Kenya, Libya, Algeria, and Liberia.

Rio Tinto group''s subsidiary, Energy Resources, that produces more than a 10th of the world''s mined uranium, has indicated that it will spend A$57 million expanding its Ranger mine in Australia''s Northern Territory, in order to add 4,857 metric tons of uranium oxide to the site''s reserves.


The Australian dollar traded to 18-year high on the back of widening yield premium. Indications of further interest rates cuts by the Federal Reserve also propped up the Aussie dollar which rose by 12% in the last four weeks. The Aussie dollar closed at $0.8795 at the close of trade, compared with $0.8729 late yesterday. The traders expect Aussie dollar to cross $0.8900 by the yearend. The Aussie currency has now risen by 5.5% since Sept. 18, when the Fed cut rates by half-a-percentage point to 4.75 percent. Traders looking to exploit arbitrage are focusing on yield spread of 2.5% between the Australian and the U.S. short term government bonds.

Of the ASX 200 index shares, Queensland Gas led the gainers with a rise of 8.44% followed by increases in Energy Resource Australia by 6.52%, in Paladin Resource by 5.72%, in Cabcharge Australia by 5.4%, and in Aquarius Platinum by 5.26%. Of the ASX 200 index stocks Centro Retail Group led the decliners with a fall of 4.9% followed by losses in Nufarm Ltd of 3.2%, Gud Holdings by 3.1%, in Compass Resources by 2.9%, and 2.9% in Aristrocrat Leisure.