Possible end of rate cuts stimulates Australian dollar

02-06-2009 16:55

The AUD seems to be reaching its first weekly gain against the US dollar and this would be this year’s first gain against the US dollar. Traders expect the end of rate cuts soon and the Australian economy to improve before long as a result of government’s stimulus measures. The Australian dollar rose for the third consecutive day this week. The Reserve Bank of Australia noticed that the current monetary policy easing, together with the fiscal measures, will stimulate the economy as currency traders considered this notification as the potential end of Australia’s interest rate reducing. Also the improvement in the Asian stock markets, which advanced the high-yielding currencies, gives the AUD a boost.

A record minimum level of 3.25% remains a stimulation for growth but a threat for price deflation while the Australian policy interest rate still attracts yield-aimed investors. The administration believes that the national GDP will continue to rise this year which will certainly make the Australian markets more interesting than those of some developed countries.