CANBERRA: The Australian dollar is higher as traders bank on a US central bank rate rise later in the year. At 1700 AEST on Friday, the currency was trading at 72.28 US cents, up from 71.85 cents on Thursday. Commonwealth Bank currency strategist Elias Haddad said the local currency had enjoyed a sharp gain following the Fed’s decision to keep the interest rate unchanged.
“The Australian dollar is benefiting as we see equities in Europe going up,” Ms Haddad said. He said the the local currency had traded sideways for most of the Asian session after Reserve Bank of Australia Governor Glenn Stevens reiterated the central bank’s neutral stance and said Australia’s economy was improving at a slow pace.
Early on Friday morning, the local currency briefly spiked at 72.76 US cents, its highest level since August 24, after the Federal Reserve kept its interest rate unchanged, but then moved lower.
Fed chair Janet Yellen cited worries about the slowdown in China as the reason why there wasn’t a rate rise this week but added that the US economy continues to grow moderately and there will be an increase before the end of the year.
At 1700 AEST, the Australian dollar was at 86.47 Japanese yen, up from Wednesday’s close of 86.82 yen, and at 63.38 euro cents, down from 63.57 euro cents. The Australian bond market is firmer following a keenly awaited decision by the Federal Reserve to keep its interest rate unchanged. RBC Capital Markets fixed income strategist Michael Turner said Australian bond futures were well bid on Friday after prices moved higher overnight.
“The main mover has been the Fed’s decision not to hike interest rates,” Mr Turner said. “We opened at the highs of the session and have been dribbling a little bit lower in price since then.” Mr Turner said the Fed decision had been one of the most keenly anticipated rate decisions in years.
