By: Barbara Zigah
The Australian Dollar retreated in Asian trading today, trimming gains made immediately following the announcement by the Australian central bank that a key interest rate would be raised to 4.0%, up from 3.75%. One foreign exchange strategist in Tokyo commented that the markets were not completely surprised by the rate hike, given the recent improvements in the Australian economy; as well, they had been expecting to see the increase after last month’s central bank meeting, and thus this interest rate increase had already been factored into the pricing. He also mentioned that it was his opinion that the Australian currency was presently overvalued and expected to see some correction. While the Aussie did initially climb versus the U.S. Dollar to $0.9035 on word of the rate increase, the currency soon fell back to $0.8989, a .2% loss from late yesterday’s trading in the U.S.
The U.S. Dollar also gained against the single currency Euro and the Pound Sterling. As reported at 2:54 p.m. (JST) in Tokyo, the U.S. Dollar traded against the Euro at $1.3539, up .2% and nearing the 9-month peak struck last month on the EBS trading platform when it hit $1.3443. Versus the Pound Sterling, the U.S. Dollar traded at $1.4935, an increase of .4%. According to one European bank trader, the Sterling and Euro outlook is grim, given the political and economic pressures on them.