DOLLAR HITS FOUR-MONTH HIGH ON RATE DECISION

Written on the 8 August 2012

DOLLAR HITS FOUR-MONTH HIGH ON RATE DECISION

THE Australian dollar has soared to a four-month high of $1.06.

The currency jumped after the Reserve Bank of Australia (RBA) yesterday left the base interest-rate unchanged at 3.5 per cent.

Currency traders OzForex confirm the dollar today opened nearly unchanged at $1.055 and expect the currency will move between $1.0510 and $1.0580.

“There appears a general reluctance to take it further, despite the attraction of the higher-yielding asset by foreign central banks that continue to invest in the Australian dollar, as a means of diversifying their currency holdings during times of general uncertainty,” says corporate dealer Michael Judge.

Currency strategists from the Commonwealth Bank of Australia agree the market responded “favourably” to the RBA rates decision, but also doubt the dollar will hit 107 or 108 US cents anytime soon.

The RBA’s assessment of the outlook for inflation remains unchanged for the next two years.

“Inflation remains low with underlying measures near 2 per cent over the year to June and headline consumer price index inflation lower than that. The effects of the price on carbon will start to affect these measures over the next couple of quarters,” says RBA governor Glenn Stevens.


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