The Australian dollar also rallied overnight, moving up over 4.5% vs. the US$ in European trading. The Australian dollar rose as Prime Minister Kevin Rudd said yesterday his government will guarantee all deposits with financial institutions for the next three years to bolster confidence in the banking system. The government will also guarantee all “term wholesale funding” by Australian banks operating in international credit markets. This was an aggressive move by the Australian government to stem the run on the AUD$, and right now it seems to be working. With just a small amount of confidence creeping back into the markets, some investors are actually moving money back into the ‘carry trades’ which have benefited the high yielding AUD$ and NZD$ over the past few years. Investors should not count on any ‘carry trade’ rallies to last, as these investors have proven to be extremely volatile over the past year.

But we are possibly seeing an end of the all out attack on the AUD$ which has occurred over the past few months. If the latest move by Prime Minister Rudd works, we should see the AUD$ start to slowly gain back some of the recent losses. Aussie continues to have excellent commodity resources, and a direct trading link to China and the rest of Asia.

And I will close out today’s Pfennig with another update on the Icelandic krona. Trading in Iceland’s krona all but dried up last wee as the country’s banks collapsed, sending the currency’s bid/ask spreads skyrocketing. There is currently no active market for the Icelandic krona, and trades are very difficult to get through. JP Morgan Chase & Co. was reported to be in negotiations with Iceland’s central bank to underwrite all krona trades in an attempt to unlock the currency markets, according to TD Securities in London. We continue to attempt to close out the Icelandic krona CDs as they come due, and will use every effort to get investors in this currency traded back into US$. We were able to get the Icelandic currency traded last week and expect to be able to again this week, but can’t make any guarantees. We will continue to keep you updated on the status of these very volatile markets.

Now on the the big finish:

Currencies today 10/13/08: A$ .6693, kiwi .6044, C$ .8572, euro 1.3620, sterling 1.7332, Swiss .8845, ISK (no quote), rand 9.2399, krone 6.1787, SEK 7.0841, forint 185.28, zloty 2.6036, koruna 18.102, yen 100.46, baht 34.26, sing 1.4695, HKD 7.7636, INR 48.26, China 6.8258, pesos 12.6735, BRL 2.313, dollar index 81.18, Oil $82.24, Silver $10.535, and Gold… $850.40

Source:

http://www.dailypfennig.com/currentIssue.aspx?date=10/13/2008

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