Aussie Soars to Near 15 Year Highs Against the Yen

The Australian capital markets did well today while Aussie consolidated its gains against the US dollar and reaching a near 15 year high against the yen. ASX had a 28.6 gain despite falling metal prices, and the demand for Australian bonds pushed the yield on the 10-yr by 1 basis point.

Business survey sees untapped potential - The report of a major investment bank and a technology company pinpointed small and medium enterprise lending as the next growth area and market battleground for banks. The report also discovered that small businesses are currently unsatisfied with the services and are eager to switch to alternative lenders. Australian commercial banks should act quickly in response to the growing number of surveys that identify their weaknesses, as the international competition might rush in quickly to take away their growth opportunities. [I]Source: Herald Sun
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Japanese giant in WA iron ore deal - Japanese Mitsubishi Corp. has agreed to partner with Murchison Metals? on its new West Australian iron ore project, holding a 50% stake. The project would cost the two corporations an estimated $3 billion to develop the mine and the transportation infrastructure by 2011. This deal signals Asian demand for sustainable sources of raw material. [I]Source: The Australian[/I],20867,21928078-5005200,00.html
Cheers and jeers for BHP greenhouse policy - BHP Billiton?s new policy on climate change was named as “one of the best in the world” by sustainable investment advisers, but called “disappointingly weak” by environmentalists. BHP has announced a five-year plan to spend $300 million to improve energy-efficiency of operations and develop low-emission technologies. Currently it?s on track to achieve a 7% reduction of intensity by the end of 2007, ahead of initial target of 5%. Teaming up with another mining giant, Rio Tinto, BHP is participating in $1 billion project to build a zero-emission coal-fired power station in the US, and Rio joined forces with British Petroleum to develop a similar plant in Australia. While environmentalists view BHP?s efforts as too weak, a Zurich-based investment advisory firm said the policy as one of the finest in the corporate world. The only way to meet the demand of environmentalists would be to drive emission to nothing by shutting production, but that is clearly not likely to happen. [I]Source: The Australian.
As the US 10yr yield dipped a little, Aussie has dominated hearts and pockets of carry traders today, reaching a near 15 year high against the yen and regaining its stance against the US dollar. Preliminary imports for May have printed positive 3% versus prior -3%. This result can be interpreted either as signal of increasing investment and consumption, boosting Aussie?s performance, or a widening trade gap that would have negative impact. The market either ignored this data or had mixed feelings about it, as Aussie moved up and down after the release.

[U][B]Stock Market[/B][/U]
The change of price for oil and metals dominated the moves of the ASX. The falling metals dragged the index down a little, but high oil prices provided a positive shock. BHP and Woodside Petroleum were largest gainers, leading the market with 0.7% climb to a record high (BHP) and 2% rise to more than a year high (Woodside). The stock prices of both companies were boosted by the takeover talks. Rumors spread that Royal Dutch Shell might bid for Woodside and BHP might bid for American Alcoa and/or Canadian Alcan. The index closed at 6372.00, up by 28.6 points.

[U][B]Bond Market[/B][/U]
Bond yields lowered, following the US ones. After US yields went down and carry traders rushed to Australia, the yield slipped but remained steady throughout the day.