The Minimum Wage Increase Does Nothing to the Aussie

The Australian markets had a solid day with the commodity price hikes boosting the ASX to a fresh 10 day high and yields rising in response. The Aussie had a quiet day, trading in a narrow 19 pip range due to the absence of economic announcements and unimpressive rise of the minimum wage.


Wage ruling shocking and no reward: ACTU - The Australian Council of Trade Unioins (ACTU) stated that today?s rise of the minimum wage for the low income Australians has been the lowest in ten years. ACTU?s president Sharan Burrow is strongly disappointed, stating that the increase is unfairly low considering the booming economy and the skyrocketing prices for housing and petrol. The raise to $10.26 a week is not expected to deliver any real inflationary pressure and had modest negative impact on the Aussie. Source: Herald Sun.,21985,22022447-5012062,00.html
BHP shores up dwindling oil - BHP Billiton in partnership with a Houston based Apache Energy has committed to a $1.7 billion oil development project off of Australia?s northwest coast. The field is believed to be the last large oil reserve that Australia has. It is estimated to contain between 80 and 120 million barrels of oil, giving the development an estimated life of 25 years. The field will be operational in late 2009 or 2010 and is expected to boost the daily Australian oil production by as much as 17%. Source: The Australian,20867,22019312-5005200,00.html
Gloucester expects rejection of Xstrata bid - The Gloucester chairman Andy Hogendijk announced today that the proposed $391 million takeover bid from the Swiss mining giant Xtrata is not likely to gain approval of its major shareholders. The company is currently looking for a new CEO to replace the current Calving May whose contract expires at the end of July. Hogendijk stated that the outlooks for the company remain promising. Apart from the leadership change, the company will stick to its current business plan and financial and operational strategies. Source: Herald Sun,21985,22021687-5012062,00.html

The Aussie appeared to have found its comfort zone around .8580 for today. Lifted up by the narrowing trade balance driven by strong exports, the Australian currency did not have any events on the economic calendar today. With the US markets closed for the Fourth of July holiday, the Aussie had a remarkably quiet session with a mere 19 pip range, trading between 0.8566 and 0.8585. Some analysts remarked that the morning downfall of the Aussie was caused by the slight increase of the minimum wage. However, the currency quickly found support at 0.8566 and traded above it for the rest of the day.

[U][B]Stock Market[/B][/U]
Unlike the Australian currency, the ASX index had a remarkable run up. With commodities rising sharply, namely copper reaching its highest price since mid May on London Metals Exchange, the Australian mining companies gained significantly. The industry leaders BHP Billiton and Rio Tinto were in the lead added 1.9% and 2.2% respectively. The index rose impressive 63.7 points to 6362.3

[U][B]Bond Market

[/B][/U]The Australian bond yields were driven by the sharp increase of the US yield. The small minimum wage increase might have added to the momentum. However analysts rejected the idea that it will provide any real inflationary pressure. The yield stayed virtually unchanged during the day, trading in range of about 1 bp and ending the day 4.1 bps up at 6.212%.