Wool Market Correction Occurs

February 8, 2008 - The Wool Exchange's Australian Market Indicator (EMI) has fallen for a second week, down 10 cents (1 percent) to close on 997 Australian cents/kg clean. In U.S. currency, the market saw a fall of 5 cents (0.6 percent) with the Australian dollar rising slightly to 89.25 U.S. cents. The EMI has dipped below the 1,000 cent mark for the first time since December 6.

Analysts say the decrease is partly due to changes in the exchange rate over the last few days. At one point, the Australian dollar reached 90.69 U.S. cents - almost 2 cents up on last week.

The recent decision by the Reserve Bank of Australia to increase interest rates by 0.25 percent to 7 percent may also have had a negative impact on the market. The EMI fell 10 cents/kg on Tuesday and a further 7 cents/kg on Wednesday before rallying with a 7 cents/kg rise on Thursday. Experts say the sharp fall is a reflection of the continuing correction that has been affecting the Eastern markets.

The national offering of 61,324 bales - which brought a clearance of 83 percent - was almost a third larger than last week's total. After prices fell over the first two days, demand increased. China was again dominant, while Europe was more active, particularly Modiano and G Schneider. At Thursday's sale in Sydney, Korean and Italian buyers reportedly targeted the finer microns, paying higher premiums than the Chinese. Despite a weaker market, the average price indicator for 17.5 microns still rose by 20 cents for the week.
Reprinted in part from The Wool Market Exchange

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