The Australian Dollar reached its highest since 1983 against the greenback on sudden increase in Australian Interest rate. The negative news of monetary easing further contributed to weakening of the US dollar against the Australian dollar.
The Australian dollar surged 1.4 percent to $1.0001 against the greenback however resistance has been seen at $1.0015.
Australian cash rate was increased by 25 basis points to 4.75 percent which resulted in the currency hike making Australian dollar cross $1.0013, the highest since 1983. The sudden increase in interest rates is implemented by Reserve Bank of Australia as measure to control increasing inflation.
On the other hand Federal Reserve in United States is focusing towards easing the monetary policy as a measure to stimulate the slowing economy. Most Analysts believe that the easing of monetary policy by Federal Reserve will further weaken the US dollar resulting in more depreciation against the Australian Currency.
Chief currency strategist Carl Hammer at SEB in Stockholm stated, “We’re entering uncharted territory, but the Aussie has staying power up here, we see it trade above parity in the mid-term, as there’s also the issue of general dollar selling.”
However some traders expect the US dollar to rebound in anticipation of US midterm elections. Market on the other hand is also extremely short of dollars and Federal Reserve looking forward to purchase at least $500 billion worth of treasury bonds in next few months. The bond purchases are expected to create more uncertainty and it is expected the US dollar will remain volatile.
