By: Barbara Zigah
With foreign exchange investors anticipating that the Reserve Bank of Australia will hike key interest rates later this week, they sold off their holdings in the relative safety of the Japanese Yen to buy the Australian Dollar, precipitating the Yen’s decline from earlier gains. As reported at 3:42 pm (JST) in Japan, after an initial drop to 79.45 Yen, the Australian Dollar rose 1.2% in Asian trading to trade at 81.42 Yen.
The Australian Dollar didn’t fare as well against other currencies. Against the U.S. Dollar the Australian Dollar traded at $0.9048, a 1% decline on the day; earlier it had approached a 1-month trough of $0.8906 before finally rebounding. Some market players attributed the Australian Dollar’s declines to the closing out of risk trades versus the U.S. currency.
The U.S. Dollar Index, a gauge of the greenback’s value versus a basket of major currencies, slipped .2% to trade at 76.139 .DXY. Traders are exercising caution in advance of this week’s forthcoming meetings of European central banks, as well as the U.S. Federal Reserve Bank’s rate setting committee, which will be meeting tomorrow and Wednesday. Investors are hoping that the tone of the Fed meeting will set the stage for an interest rate hike sooner than analysts predict.