FOREX - AUSTRALIAN DOLLAR OPENS HIGHER - JULY 1, 2004.

SYDNEY, July 1 Asia Pulse - The Australian dollar rose against a broadly weaker United States dollar overnight following the first US interest rate rise in four years.

At 0845 AEST the local currency was trading at 69.75 US cents compared to 68.86 US cents at yesterday's close.

Overnight the Australian dollar reached a low of 68.80 US cents and climbed to a high of 69.95 US cents after the US Federal Reserve Open Market Committee (FOMC) announcement that it had lifted official interest rates by a quarter of a percentage point, taking them to 1.25 per cent.

Marking the beginning of a widely anticipated tightening cycle, the rate rise formally ends an easing cycle that began in 2001 and took rates to a low of one per cent.

"The Australian dollar was actually a fair amount stronger prior to FOMC, but afterwards it kicked higher again," National Australia Bank's strategist in New York, Michael Jansen said.

He said one reason for this was that a weaker than expected Chicago Purchasing Management index of business conditions, which fell to 56.4 in June, had pushed down the US dollar.

Macquarie Bank currency strategist Jo Masters said the effect of a softer yen, underpinning Australian dollar/yen and euro/yen, combined with the soft US data, had taken the local currency to around 69.50 US cents.