The Australian dollar held firm against the U.S. currency on Monday, while bond futures surged on safe-haven inflows and expectations that problems in the U.S. financial sector could prompt the Federal Reserve to lower rates.

* The U.S. dollar tumbled in early trade on Monday [nWEL000750] after talks to sell beleaguered investment firm Lehman Brothers faltered at the weekend and the company could be headed for bankruptcy.

* Deepening worries about the health of the U.S. financial system drove investors to the safety of government bonds while stock futures pointed to a weak start.

* Australian bond futures surged, tailing U.S. Treasuries which rallied on Monday. The Federal Reserve meets on Tuesday to decide on rates and there was talk of emergency liquidity measures to stabilise the financial system.

* Three-year bond futures jumped 0.110 points at 94.495, while the 10-year bond contract rose 0.075 points to 94.415.

* By 9:35 a.m., the Aussie was at $0.8205 against the U.S. dollar, up from $0.8045 late here on Friday, and well off a one-year low of $0.7900 hit last week.

* The Aussie also rose to 87.45 yen from 86.31 yen late here on Friday, but demand for leveraged carry trades is likely to stay muted amid lingering risk aversion.

* Higher commodities, especially firm gold prices, also boosted the Aussie. The Aussie has been under pressure recently as investors have dumped commodity-linked currencies amid worries about global growth.

* Local data on Monday includes dwelling starts for the second quarter. Retail sales and jobs data last week showed the Australian economy was pretty resilient to global credit crunch.

* All eyes are on Tuesday’s release of the minutes of the Reserve Bank of Australia’s last board meeting held earlier this month. The central bank lowered rates for the first time in seven years at the meeting and the minutes could give an insight on whether rates would be lowered further.

Source: http://www.afxnews.com

Related Content