Australian dollar at record high against Euro: Economy Roundup

The Australian dollar has managed to record a record high against the Euro overnight as a plan was struck to help bailout debt-stricken Greece. The Euro fell to a 10-month low against the Australian dollar at $1.4595, eventually settling at $1.4630 last night where it remains.

The plan will involve bilateral loans and money given from the International Monetary Fund. The agreement was made at an EU summit, with leaders endorsing the text of an agreement.

But terms imposed by German Chancellor Angela Merkel will dictate that a standby mechanism can only be used when necessary and under strict conditions.

“There’s an agreement. We’ve given the signal that had to be given,” Portuguese Prime Minister Jose Socrates told reporters. “It’s a show of solidarity.”

Back home, RBA governor Glenn Stevens has said growing Asian countries could lift their living standards by allowing currencies to appreciate and by importing from developing countries.

But he also warned that countries in large amounts of debt, such as those in Europe and North America, must develop plans to reach a status of fiscal sustainability.

“The stabilisation of financial markets and banking systems over the past year or more is a welcome development for all of us,” Stevens told the ACI Financial Markets Association 2010’s 49th World Congress. However, he said there are still difficulties facing a global recovery.

“Looking ahead, the differences in the speed of economic recovery are starting to present challenges of their own, showing up as they do in capital flows, asset valuations and exchange rates.

“When we add to all that the looming long-term requirement for fiscal consolidation in a number of major countries, there is plenty for markets and policy makers alike to think about.”

Current account deficit up

The current account deficit rose by 19% to a seasonally adjusted figure of $17.46 billion during the December quarter 2009, according to the latest figures from the Australian Bureau of Statistics.

The deficit on the balance of goods and services rose by $1.8 billion to $6 billion, while the primary income deficit increased by 9% to $11.2 billion.

In chain volume terms, seasonally adjusted, the deficit increased to $7.7 billion during the December quarter, and is expected to detract 1.3% points from growth in the December quarter measure of GDP.

Australia’s net international investment position rose by $12.4 billion to a net liability position of $768.6 billion in the December quarter. Net foreign debt liability increased $14.2 billion to a liability position of $647.9 billion, while the foreign equity liability figure decreased $1.8 billion to $120.7 billion.

Verdict expected in Hu trial on Monday

The Federal Government has said it expects a verdict in the Stern Hu trial on Monday, with four executives from mining giant Rio Tinto charged with bribery and theft of commercial secrets.

“The Shanghai Number 1 Court has informed Australia’s Consulate General in Shanghai that the verdicts in the trial of Mr Stern Hu will be delivered on Monday, 29 March,” Australia’s foreign affairs department said in a statement.

“Australian consular officials will be present at the court at this time. The Australian government will make a considered statement after the conclusion of these processes.”

The Australian sharemarket has opened slightly lower today, despite a rally on Wall Street and gains in metals markets overnight.

The benchmark S&P/ASX200 index was down 44 points or 0.92% to 4840.4 at 12.10 AEST, while the Australian dollar also fell to US90c.

Commonwealth Bank shares fell 1.2% to $56.54, with ANZ also losing 0.3% to $25.27. Westpac shares lost 0.8% to $27.56 as NAB lost 0.4% to $27.40.

The Australian Competition and Consumer Commission has raised questions about the proposed tie-up between mining giants BHP Billiton and Rio Tinto.

In a statement the ACCC has said it will need to examine the likelihood the joint venture will not withhold supply from iron ore markets, and called for submissions.

“These include the fact that the only significant purchaser of iron ore in Australia, BlueScope Steel, has publicly raised concerns about the proposed joint venture,” it said.

Toll road operator Transurban Group has said it is interested in road assets to be offered for sale by the Queensland Government in 2011.

In a slide presentation to investors today, the company said the state was an attractive market. “(The Queensland) government asset sales program may be attractive,” Transurban said. “QML could be of interest if procured to suit a long-term owner and operator.”

Bernanke claims low rates still appropriate as economy recovers

Overseas, US Fed Chairman Ben Bernanke has said low interest rates are still appropriate as the economy continues to recover, but that any further expansion will see the Fed ready to lift rates.

“The economy continues to require the support of accommodative monetary policies,” he said at the House of Representatives Financial Services Committee.

“However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.”

He also said the Fed’s asset purchase program, in which the bank bought mortgage debt and treasury bonds, were appropriate and helped to improve conditions.

On Wall Street, investors were encouraged by data showing the number of US workers filing for jobless aid fell last week to a seasonally adjusted 442,000, according to the Labor Department. The Dow Jones Industrial Average gained five points or 0.05% to 10,841.21.