FED:RBA cuts interest rate again=5

AAP General News (Australia)
12-06-2011
FED:RBA cuts interest rate again=5

Commonwealth bank currency strategist Joseph Capurso said the local currency had moved
lower on new of the RBA's rate cut, based on its negative reading of global conditions.

"They were a little bit more bearish about the global economy than the market was expecting,"

he said.

"I think that's why the Aussie dollar dropped a good half (US) cent. In particular
the RBA highlighted that they see a ... material slowing in global growth, and I think
that's the thing that scared the market."

Mr Capurso said he would not rule out another decision to cut rates early next year,
given the central bank's concern about global growth.

"The global growth outlook is very important for the RBA in their decision making,
so if they see a risk that global growth could be materially worse, that will raise the
possibility of even more rate cuts," he said.

"We have another rate cut predicted for February, so if we're right, that will be three
meetings in a row."

It seemed the central bank was concerned about the spread of instability in the eurozone
into Asian markets, Mr Capurso said.

"The difficulties are in Europe, but they seem to be spilling over into Asia," he said.

"For two months now, they've said that trade in Asia is seeing some effects from some
of this slowing down in economic activity in Europe, and that's really what they're interested
in." AAP css/dlm

KEYWORD: RATES UPDATE 5 SYDNEY (REOPENS)

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