Dollar above US92 cents on rate risks
An AAP and The Australian report says that the Australian dollar is back above US92 cents today, underpinned by expectations the Reserve Bank will raise interest rates this week and push a hawkish outlook.
The local currency was trading at $US0.9220/25, up from Friday’s close of 0.9160/66.
In the offshore session, it traded between a low of $US0.9140 and a high of 0.9250.
Bank of New Zealand currency strategist Danica Hampton said risk appetite took a hit as news emerged that the US’s biggest bank, Citigroup, had held an emergency meeting at the weekend.
The revelation had a mixed effect on high interest rate currencies, as fears of more troubles in the US housing and finance sectors also encouraged traders to sell the US currency.
“It was a peculiar session,” Ms Hampton said. “It was a case of US dollar selling on these renewed fears in the housing and finance sectors.
“The widening of the US interest rate differential spread helped underpin the Australian dollar.”
Ms Hampton said heightened risk aversion also encouraged carry traders to sell out of high-yielding currencies like the Australian and New Zealand dollars for the low interest rate Japanese yen.
The Australian dollar had a boost early in offshore trade after the US Department of Labour revealed that non-farm payroll employment grew by 166,000 in October, while the jobless rate for the month stayed at 4.7 per cent.
“The non-farm payrolls helped reassure people that US growth is quite robust,” Ms Hampton said.
The Australian dollar is expected to be bought on dips at $US0.9180 today, and could challenge its offshore trade high of 0.9250 if risk appetite holds up in a climate of volatility.
“I think it’s a hard one because it’s a peculiar session,” Ms Hampton said.
The Reserve Bank of Australia, which meets tomorrow, is widely tipped to raise interest rates by a quarter of a percentage point when it announces its decision on Wednesday.
A Report by The Mole, AAP and The Australian
John Alwyn-Jones
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