Dollar falls below US98 cents as euro hopes fade: Midday roundup

The Australian dollar has continued to fall, dropping below US98 cents as hopes of any progression in the European debt crisis have begun to dissipate.

This morning the dollar dropped as low as 97.53 cents, after beginning the week at 99.2 cents. It was trading at US97.72 cents at 12.00 AEST.

European leaders met last night in Brussels in order to discuss a new financial agenda for the region. But European Council president Herman Van Rompuy said in a letter that this wasn’t a time to draw conclusions on what should be done.

The impact on the dollar was also strengthened after comments from former Greek prime minister Lucas Papademos that the country was considering leaving the euro zone.

Economic growth outlook below trend

The outlook for economic growth is on the rise but is still below average, according to the latest Westpac-Melbourne Institute Leading Index.

The index measures the likely pace of economic activity three to nine months in the future.

The index was 2.2% in March, well below the long-term trend of 2.9%.

Westpac chief economist Bill Evans said in a statement the growth rate has been below trend for several months.

“This is the seventh consecutive month that the growth rate in the Leading Index has been below trend,” Evans said.

“The growth rate has picked up somewhat from the absolute low in November last year, but the level in March does not encourage too much optimism that growth is likely to exceed trend any time soon.”

“That profile is consistent with Westpac’s forecast for growth in the Australian economy in 2012 of 3%, which would mean that Australia had grown below trend for five consecutive years.”

Shares continue to fall

The Australian sharemarket has continued to fall this morning, down another 1% on euro fears and poor company results after Myer announced a profit downgrade.

The benchmark S&P/ASX200 index was down 41 points or 1% to 4079.2 at 12.00 AEST.

Analysts suggest the Myer result indicates a negative trend for other retail shares

High mortgage rates due to deposit competition, Clyne says

NAB chief executive Cameron Clyne says high competition for deposits is to blame for higher mortgage rates.

According to Fairfax, Clyne says European pressure has eased but competition for deposits remains high.

”What is happening in Europe is not having an impact on our cost of funding today because we can always sit out of the [wholesale debt] market for a period,” he says.