re: Unscrupulous posters.Aussie Dollar/interest ra
Rob, A movement upwards in interest rates is generally associated with a stronger currency (not always) (but usually)----see recent news article below--Steve --------------------------------------------------- Dollar surges after rates talk 31may02
THE prospect of higher interest rates in Australia has led to the Australian dollar rocketing higher in afternoon trade, with 57 US cents in its sights.
At 1700 AEST the Australian dollar was worth $US0.0.5682/87 compared with 0.5644/49 at yesterday's close.
The unit was closing on its highs, after touching 0.5689 a short time ago with a low for the day of 0.5625.
Macquarie Bank divisional director Geoff Bowmer said the Australian dollar has made significant moves north this afternoon, despite a blip caused when the Bank of Japan intervention to support the yen.
"Apart from the blip, the Australian dollar has spent much of the lunch and afternoon session running higher on the back of heightened interest rate anticipation," Mr Bowmer said.
RBA governor Ian Macfarlane today appeared before the House of Representatives Standing Committee on Economics, Finance and Public Administration, and said that interest rates needed to rise to avoid the economy overheating.
A rise in interest rates would increase the rate differential between Australian and US rates, which would support the local currency.
Mr Bowmer said that as news of Mr Macfarlane's comments spread through the Asia Pacific region, there was increasing interest in the Australian dollar.
Mr Bowmer noted that the Bank of Japan had intervened today to support the yen, against the US dollar.
"If they are going to be successful in turning the US dollar, then US dollar weakness will no longer underpin the Aussie," he said.
The US dollar was worth 123 yen before the Bank of Japan got into the market and started buying, which sent the cross rate to 124.5 yen very quickly.
"One of the basic stories supporting the Australian dollar strength is US dollar weakness ... but if the Bank of Japan is successful in buying US dollars - giving it some strength - the underlying story favouring the Aussie, is less of a story," Mr Bowmer said.
He said the USD/JPY cross was very important to the Australian dollar's hope of raising higher.
But Mr Bowmer said he would not be surprised if the unit had broken through the 57 US cent mark to find a base around 0.5710.
Moody's Investors Service today downgraded Japan's credit rating, for yen-denominated domestic securities issued or guaranteed by the Government of Japan by two notches to A2 from Aa3.
Moody's assigned a stable outlook to the new rating.
AAP
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