Thursday, October 08, 2009

Aussie Dollar Rises Above 90 U.S. Cents

Following the recent interest rate hike by the Reserve Bank of Australia and today's strong Australian employment report, which showed that employment rose by more than 40,000 in September (the equivalent of more than 560,000 in America), the Australian dollar rose above 90 U.S. cents for the first time since August 2008. It was as low as 61 U.S. cents in late October 2008 and 70 U.S. cents on New Year's Eve.

Given the relative strength of the Australian economy, more interest rate hikes are likely in Australia. It is less certain to what extent that will translate into further strength for the Australian dollar as the markets have already priced in further rate hikes and as the Australian dollar no longer at this point looks undervalued from a goods market point of view (which it certainly was when it traded at or below 70 U.S. cents). It could rise a bit more before it reaches its high, but probably not by much, especially if stock prices fall.


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