Australian dollar hits $US1.09, Federal Reserve announces an end to stimulus: Midday Roundup

The Australian dollar has pushed through the $US1.09 barrier this morning, topping yesterday’s record high, as investors cast doubt on a US rate rise anytime soon and eyed further rate rises from the Reserve Bank by the year’s end.

Overnight, US Federal Reserve chairman Ben Bernanke confirmed the Fed’s $US600 billion quantitative easing program would close up in June.

Westpac senior market strategist Imre Speizer said the Australian dollar continues to rise as risk appetite remains intact globally.

While investors are also pouring into the local currency because of Australia’s links to China, others are not so bullish for the rest of 2011, and prefer the Canadian dollar instead.

“If the US economy starts to pick up and the Fed starts looking at tightening, the Canadian dollar would be better placed than the Aussie, but this is probably something more for the second half of this year,” Audrey Childe-Freeman, currency strategist at JP Morgan Private Bank, told Reuters.

“Near-term I’d rather play a bullish Canadian dollar view against the dollar or the yen. Even though there are some compelling reasons for a bearish Aussie/Canada trade it is not working because the US dollar is weak.”

At just before midday, the local currency was trading up at $US1.0913.

Market positive after yesterday’s weakness

Across to the sharemarket, and it’s had a positive start to the day, following on from solid performances offshore overnight.

At 11.45 AEST, the S&P/ASX200 index had lifted 0.5% to 4,897.4 points, while the broader All Ordinaries index was flat at 4,977.6 points.

Big movers included Computershare, which lifted on news it was buying a US share services operation, and food manufacturer Goodman Fielder, which dropped after downgrading its full-year profit guidance.

The big banks, resources companies and Telstra were all higher just before midday.

US Fed announces end to stimulus

The United States’ Federal Reserve has announced an end to the purchase of $US600 billion in bonds by June to support the country’s economic recovery.

However, in a press conference held by Fed chairman Ben Bernanke, he said the bank is no hurry to reduce its support for the economy, adding the labour market is in a “very, very deep hole”.

“It is a relatively slow recovery,” he said. “The combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination. A lot of people are having a tough time.”

The Fed also amended its growth forecasts, with the estimate for 2011 now between 3.1-3.3%, compared to the previous 3.4-3.9% forecast.

Bernanke also said interest rates would remain low “for an extended period”.

The news sent stocks up on Wall Street, where the Dow Jones Industrial Average gained 40 points or 0.3% to 12,635.

Goodman Fielder shares fall after profit downgrade

Goodman Fielder has announced a full-year profit downgrade, sending its shares down 7% to $1.08 – the lowest point since April 2009.

The company announced that it had underestimated the effect of the natural disasters on its business, and that 2011 profit would now be “in line with the prior year’s normalised earnings”.

“Timely cost recovery in our Australian baking and home ingredients businesses has proved to be very difficult to achieve in the current climate of fierce retailer competition,” chairman Max Ould said in a statement.

“During the third quarter, the company sought to recover its increased costs through price increases on its products, and we took a firm position with our major Australian trading partners.”

“This resulted in retailer resistance to price increases and some negative but largely temporary impacts on on-shelf ranging.”

The company said the third quarter saw volume reductions and delays in cost recovery efforts.

Facebook shareholders seeking exit

A number of Facebook shareholders are looking to offload $US1 billion worth of shares in the secondary market, according to a report from Reuters.

According to the report, the current deal would involve stock held by employees, and would value the company at over $US70 billion. But this represents a reduction in asking prices for the shareholders, who initially wanted to sell the shares at a company valuation of $US90 billion.