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May 3, 2005    

Australian dollar sees fall as interest rates expected to stay

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by Brian Turner
Australian dollar sees fall as interest rates expected to stay

The Australian dollar was down Tuesday morning in the European markets, mostly due to the suspicion that Australian interest rates will not be raised on Wednesday.

The Australian dollar fell 0.6c to $0.7742 in relation to the U.S. dollar, to A$2.4421 against sterling, and ¥0.5 to ¥81.35 in relation to the yen.

Opinion is that there will be no need for the Australian Reserve Bank to raise the interest rate beyond its present 5.5 percent after news that construction approval for homes fell 6.8 percent in March.

Good performance in the equity markets and high bond yields have been keeping the Australian dollar strong, but there is some opinion that these conditions will not necessarily continue unless productivity grows.

The U.S. dollar, meanwhile, fell slightly to $1.2865 as opposed to the euro and ¥105.10 against the yen as the Federal Reserve is expected to raise interest rates to 3 percent, up 25 basis points, on Tuesday. Sterling was also down slightly, to £0.6799 in relation to the euro.

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