The Australian dollar is set to break US98c after trading as high as US$0.9792 this morning on the back of concerns the United States Federal Reserve will reflate the currency.
The Aussie dollar was trading below US96c on Tuesday after the Reserve Bank of Australia held interest rates at 4.5 percent despite economists predictions they would increase by 25 basis points, with investors pulling out of the Australian currency briefly as the market ‘corrected’ when economists incorrectly predicted interest rates would be increased by the RBA.
After Tuesday’s flight from the Australian dollar, investors returned Wednesday due to increasing fears the US Federal Reserve would ‘reflate’ the US economy by printing more money in an attempt to stimulate the economy and stave off deflation fears. By printing more money the US Federal Reserve makes increases the total amount of US dollars in the economy, which makes each dollar worth slightly less, as a result traders have moved to ‘secure’ currencies like the Australian dollar, and traditionally stable commodities like gold.
Currently the Australian dollar is trading at US$0.9768 after peaking at US$0.9792 earlier this morning, economists have tipped the Australian dollar to move as high as US$1.20 within a year on the back of continued weakness in the US economy.
Against Asian currencies the Australian dollar is up slightly, buying Japanese Yen 80.9843 and Chinese Yuan 6.5391.
