Market recovers

Sharp falls in the US exchange rate, after the Reserve Bank's cut in the official cash rate, led to a 16 cents/kg rise in the wool market last week.

Australian Wool Industries Secretariat spokesman Peter Morgan said the US exchange rate fell by 1.9 per cent, which resulted in a 17c lift in the Eastern Market Indicator in US currency on the last day of trade.

"While Tuesday's market easing coincided with a fall in the US exchange rate, Thursday's market was very keen with prices up across all micron ranges and wool types," Dr Morgan said.

Elders national wool manager Andrew Dennis said a weaker Australian dollar had contributed to the more workable US dollar base limits by the end of the week.

"The currency remains range bound for now, around $US1.02, and will hopefully continue at this level as a sudden move higher could force buying limits lower again," Mr Dennis said.

He said Chinese mills and traders were on holiday to celebrate China's National Day.

"The picture overseas has not really changed in recent weeks with much price inquiry taking place but not a lot of firm purchasing," Mr Dennis said.

He said retailers and finished garment procurement staff were occupying the fence and watching for signs that consumers would be active enough to clear what has been put on the shelves this year before committing to quantities for next season.

"Time is getting tight, however, and colours, styles and blends need to be finalised before the end of the year to allow time for the processing chain to carry out the work," Mr Dennis said.

"Wool is not just an expensive fibre to process but each step takes considerable time and production lead times are already trimmed to the bone."

He said there were instances of several large spinners in different parts of the world locking in a large portion of their purchases last week.

"For some, time has become critical, while for others, wool at these levels is certainly attractive," Mr Dennis said.

"The required stimulus for an uptrend has not yet occurred and with supply seemingly stagnant, downside would appear limited."