While you were sleeping, world oil prices reached a new all time intra-day high of $US80.05 a barrel before easing back under the $US80 mark, meaning a boost to petrol prices, but not before the current ACCC inquiry into petrol pricing is finished or the federal election, whichever is sooner.

And the prospects of higher bread prices continues as world wheat prices also reached a new all time high of $US9.07 a bushell, before plunging 30c a bushell in Chicago after the US Department of Agriculture cut its estimate for the 2008 Australian wheat harvest by two million tonnes to 21 million tonnes.

That was better than the rumoured five million tonne cut that drove prices above $US9 a bushell in Asian trading yesterday. But it’s likely to be further downgraded with NSW this morning saying 71% of the state is now back in drought, with most of the prime growing areas needing good rain in the next month to six weeks or the harvest estimate will be slashed again.

The USDA lopped its estimate because of damage to crops in WA and South Australia. Victoria is also feeling the dry again. The Australian Bureau of Agricultural and Resource Economics next Tuesday releases an update to its June harvest estimate of 22.5 million tonnes. It could be less than 20 million tonnes.

Interest rates continue to rise with the ANZ sneaking credit card rates up 0.05% because of the higher short term interest rates. Rates on 90 day bank bills were at 7.08% this morning and a bit easier.

The Bank of Adelaide has lifted rates on its so-called white label mortgages which are sold under the brands of other lenders by cutting out discounts. It also lifted rates on its fixed rate home loans. The Adelaide Bank seems to be the one caught in the headlights of the rate rises in the short term money markets. It has already lifted its variable rate on its low doc loans by 0.3%.

Suncorp Metway has lifted rates on its personal banking loans by between 0.10% and 0.25%, as has the Commonwealth Bank and HSBC which have lifted rates by 0.50% and 1% respectively.

Macquarie Bank has lifted rates on its low doc mortgages by 0.30%. Virgin Money and Aussie Home Loans, two of the groups funded by Macquarie, have yet to lift rates. Macquarie has lifted rates to its own mortgage holders by 0.3%.

Bluestone and AMP Banking have boosted their mortgage rate by more than the 0.25% over the last Reserve Bank lift in rates.

Oil prices have bounced from under $US70 a barrel on 23 August as fears about a slowing US economy eased and speculators turned their attention to the commodity to get some trading action. While traders and analysts said a fall on US reserves of oil and oil products was the trigger for the sharp rise of more than 2% on the day, the slide in the value of the greenback for the sixth day in a row was the driver.

The US dollar hit a new all time low against the euro and fell to yet another 15 year low on the so-called dollar index, which measures the currency against a group of six major trading partners’ currencies.

The Australian dollar though was driven higher by the weakening US currency. The Aussie closed around 84.30c in New York, up from the 83.58c in Sydney yesterday. It retreated to 83.85c in trading in Australia today.

That’s a rise of more than 2.5% this week and the Aussie is now at its highest level since 2 August, before the worst of the subprime-induced turmoil hit world markets and high-yield currencies such as Australia (and the Kiwi dollar). The NZ Reserve Bank left its key interest rate unchanged at 8.25% this morning.

The greenback is weakening because more and more traders are coming to believe the US Federal Reserve won’t cut rates by the demanded half a per cent at its meeting next week. They are factoring in a quarter of a percentage point cut.

That’s not liked by traders who still fear the uncertainty in markets caused by the continuing credit freeze, which yesterday saw the European Central bank pump tens of billions of fresh euros into the three month money market in a bid to force a resumption in lending.

Peter Fray

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