Dollar soars on cash rate


business, puzzel, graph chart, up, jigsawThe Australian dollar has shot up above 95 US cents after the Reserve Bank of Australia gave a more neutral statement than the market expected following its interest rate decision.

But at 0700 AEST on Wednesday, the local currency had pulled back some to be trading at 94.97 US cents, up from 94.58 cents on Tuesday.

The currency reached 95.06 US cents overnight, its highest level since November 2013.

The RBA on Tuesday kept the cash rate on hold at 2.5 per cent for the 11th consecutive month.

In a statement accompanying the July decision, governor Glenn Stevens maintained that the economy was expected to grow “a little below trend over the year ahead”.

But the language used was perceived as being more neutral than what was contained in the June meeting minutes, sparking an Australian dollar rally.

The currency was also boosted by strong Chinese manufacturing figures and a rally on Wall Street overnight, BK Asset Management MD, Kathy Lien, said.

“The Australian dollar is doing extremely well. It’s been the best-performing currency during the North American trading session,” Lien said.

“First and foremost, we had the RBA statement which was not as dovish as the market anticipated.

“We also had strong Chinese manufacturing numbers and US stocks hitting record highs.

“It is the improvement in global growth which is really driving the enthusiasm for US equities and, in turn, driving enthusiasm for high-yielding currencies and the Australian dollar is the big beneficiary of that.”


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