Rio Tinto halts dollar's slide

THE dollar closed lower today, but its fall was halted by news mining giant Rio Tinto had reached agreement with Japan's leading steelmaker over iron ore contract prices. At 15pm (AEST), the dollar was trading at $US0.7764 down from yesterday's close of $US0.7801.

The local currency moved between a low of $US0.7747 and a high of $US0.7822.

Financial markets in the US and UK were closed during last night's session, leaving the Australian traders with few directional cues.

CMC markets foreign exchange dealer Tim Waterer said the silence caused some profit-taking on the local currency when the local market opened..

But sentiment for the local dollar improved with news that Rio Tinto had reached contract price agreements with Nippon for the iron ore from its Hamersley Iron operation.

The price agreed for iron ore fines for 2009 was about 33 per cent lower from the 2008 contract year but was interpreted as signalling ongoing good demand for Australian commodities.

"That announcement by Rio was seen as a positive for the Australian dollar, from a demand prospective," Mr Waterer said.

"That's what's seen it push back up closer to $US0.7800 during afternoon trade."

Nippon will pay 97 US cents per dry metric tonne unit of Pilbara blend fines and Yandicoogina fines, compared to 144.66 US cents last year, and 112 US cents for Pilbara blend lump iron ore, down from 201.69 US cents.

During the offshore tonight, the US Treasury will start auctioning $US101 billion ($129.1 billion) worth of notes, starting with an offer of $US40 billion ($51.1 billion) in two-year notes.

Auctions of $US35 billion ($44.7 billion) five-year and $US26 billion ($33.2 billion) seven-year notes are due later this week.

Mr Waterer said he expected US and european markets to use the result of the sale as a barometer of risk appetite
.
"The US dollar is going to be moving off the results of that, he said.

"It will be interesting to see what sort of levels interest there are in that tonight.

"The Aussie dollar will react to what ever happens the US dollar tonight."