AUSTRALIAN CREDIT/FOREX (0300 GMT) SNAPSHOT___

FOREIGN EXCHANGE (against previous Sydney close)

<AUD=> 0.7892/93 (0.8226/29) 1.2140/65 (1.2264/87)

<AUDJPY=R> 82.23/29 (86.98/87.05) 104.24/27(105.64/68)

<AUDEUR=R> 0.5571/76 (0.5723/26) 1.4252/54 (1.4375/77)

DEBT FUTURES CASH YIELDS

90-DAY BILL<YBAc1> (DEC) 93.400(+0.090) (DEC) 94.805(+0.070) 5.30(5.40)

10-YR BOND (DEC) 94.565(+0.065) 5.49(5.59)

3/10 SPREAD +0.240 (+0.255) AUST/US 10-YR SPREAD +211(+208)

S&P/ASX 200 4704.3(4817.7) US10-YR 3.37(3.51)

__________________________ Sept 16______________________________

* The Reserve Bank of Australia (RBA) cut interest rates earlier this month to avoid a sharper economic slowdown than necessary, although it argued policy needed to be restrictive to bring down inflation from 17-year highs.

* In its regular daily money-market operation, the RBA added a total A$2.1 billion ($1.7 billion) in cash. That was well above the market’s estimated cash need of A$828 million, implying that commercial banks’ cash balances with the central bank would expand.

_______________________________________________________________

* The Australian dollar fell to its lowest in two-and-a-half years against the yen as a wave of risk aversion, stemming from turmoil in the U.S. financial sector, gripped markets and led investors to dump riskier assets and higher-yielding currencies.

* Asian stock markets fell sharply as the collapse of Lehman Brothers, the sale of Merrill Lynch and the struggle for survival of American International Group combined to leave investors anxious about the stability of the U.S. financial system.

* Investors unwound leveraged carry trades, helping the yen surge across the board with some analysts expecting Japanese retail investors to liquidate their positions in the coming days.

* Lower commodities also weighed on the Aussie as investors fretted that the financial turmoil would drag on an already vulnerable world econmy.

* The Aussie slid to 82.23 yen, its lowest since March 2006, and down from 86.98 yen late here on Monday.

* Against the U.S. dollar, the Aussie hit one-year lows. Shortly after midday, the Aussie was at $0.7892, down from $0.8226 late here on Monday. It tumbled to $0.7885 during the session, the lowest since mid-August 2007.

* Australian bond futures advanced on safe-haven bids and expectations that the deteriorating financial conditions could force the central bank to cut interest rates again in October. The RBA cut rates for the first time in seven years this month.

* But bonds pared some of their gains after the central bank minutes reminded investors about the risks from stubbornly high inflation and wages growth.

* Three-year bond futures were up 0.07 points at 94.805, while the 10-year bond contract added 0.065 points to 94.565.

* Credit markets have tightened as banks hoard cash, leading to speculation that the U.S. Federal Reserve may have to cut interest rates when the board meets later on Tuesday.

* Markets are fully pricing in a quarter percentage point cut by the Fed on Tuesday although the Wall Street Journal said the U.S. central bank was unlikely to lower rates.

Source: http://www.afxnews.com

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