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Date Published : Wednesday, January 02, 2008
The gap between the Australian and American dollars narrowed on Wednesday, it has emerged.
According to Reuters, the Australian dollar nearly reached a two-week high, falling just short of Monday's peak, settling at 87 US cents.
Driving the increase were the differentials between interest rates, which were created by high yield premiums in the US. Investors may have been looking towards the greater possibility of a rate hike by the Reserve Bank Australia (RBA).
Expectations of an increase have been fuelled by statistics showing rises in the levels of personal and business lending in the country.
Stephen Koukoulas, global strategist at TD Securities, told the news provider: "Our current thinking is for a rate rise in February soon after the RBA gets confirmation that underlying inflation has exceeded the top end of its target range.
"For the Aussie the case remains very strong for a buy-the-dips approach, with a likely hike in Australia in concert with likely cuts in other markets."
He added that that his firm sees the Australian dollar tracking its American counterpart at 95 US cents at the midpoint of the year, as well as outperforming the Canadian dollar and pound.
A similarly strong performance was witnessed against the yen. While not hitting last week's high of 100.20 yen, the dollar climbed from a 97.33 yen low to reach 98.26 yen.
The Australian dollar is the sixth most traded currency in the world, according to GoCurrency.com, and accounts for around five per cent of worldwide foreign exchange transactions.
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