Australian Dollar Rises to 24-Year High as Inflation Quickens
Australian Dollar Rises to 24-Year High as Inflation Quickens
by takeshitsai on Wed Apr 23, 2008 9:43 pm
The Australian dollar climbed to the highest since 1984 after a government report showed consumer prices rose at the fastest annual rate in seven years, fueling speculation the central bank will resume raising interest rates.
The currency gained for a third day as traders added to bets the Reserve Bank of Australia will increase its benchmark borrowing rate from a 12-year high of 7.25 percent as soon as next month. The local dollar was the second-best performer of the 16 most-active currencies as inflation exceeded the central bank's target and topped a forecast by Governor Glenn Stevens.
``The risk remains there is going to be a further rate hike as domestic demand does not slow as the RBA forecasts,'' said Sue Trinh, a currency strategist at RBC Capital markets in Sydney. ``The market will want to test the high'' in the Australian dollar versus the U.S. dollar, she said.
The Australian dollar rose to 95.17 U.S. cents, the highest since March 1984, before trading at 94.93 cents as of 4:47 p.m. in Sydney. It gained from 94.63 cents immediately before the report was released and 94.34 cents late in Asia yesterday. Its previous high was 94.98 cents touched on Feb. 29. The currency may climb to 95.20 cents today, Trinh said.
Australia's dollar also gained against Japan's currency, rising to 97.80 yen from 97.34 yen late yesterday. It reached 97.99 yen, matching its April 21 high, which was the strongest level since Feb. 29. The currency may advance to 98 yen today, Trinh forecast.
Fastest Since 2001
Consumer prices rose 1.3 percent from the fourth quarter, when they gained 0.9 percent, the Bureau of Statistics said in Sydney. The median estimate of economists surveyed by Bloomberg News was for a 1.1 percent advance. The 4.2 percent annual gain was the fastest since the second quarter of 2001.
The RBA raised borrowing costs a quarter-point in February and March to cool inflation and bring the annual consumer-price index to between its 2 percent to 3 percent target.
Australia's dollar dropped as low as 90.92 cents on April 4 after Stevens said Australia's headline consumer prices probably rose about 4 percent in the first quarter from a year earlier, which may be the ``peak.''
Australian government bonds fell. The yield on the benchmark 10-year note rose 5 basis points, or 0.05 percentage point, to 6.25 percent. That's 2.54 percentage points more than the similar-dated benchmark U.S. Treasury note. The price of the 5 1/4 percent note due March 2019 declined 0.333, or A$3.33 per A$1,000 face amount, to 92.162.
Seventh Day
Australia's dollar gained for a seventh day versus the yen, the longest run since July 20, as the odds of an RBA rate increase after its next meeting on May 6 rose to 30 percent from 10 percent yesterday, according to a Credit Suisse Group index based on interest-rate swaps. A similar index showed traders have begun pricing in a rate increase in the next 12 months.
Technical charts suggest the currency may rise to 96.50 cents within a month should it stay above 95 cents, said Kengo Suzuki, a currency strategist at Shinko Securities Co. in Tokyo.
Resistance at 96.50 cents is near the Australian dollar's March 1984 high of 96.53 cents, Suzuki said. The so-called Aussie failed to rise above 95 cents in February and March, so a break of this resistance shows it may gain further, he said.
``We're near an important resistance level that the Aussie has failed to break in the past,'' Suzuki said. ``The signs are all pointing toward a bullish trend, and the Aussie's gains could accelerate quickly.''
Stochastics and moving average convergence/divergence charts are providing a signal to buy the currency, Suzuki said. Resistance is a level where sell orders may be clustered.
The currency gained for a third day as traders added to bets the Reserve Bank of Australia will increase its benchmark borrowing rate from a 12-year high of 7.25 percent as soon as next month. The local dollar was the second-best performer of the 16 most-active currencies as inflation exceeded the central bank's target and topped a forecast by Governor Glenn Stevens.
``The risk remains there is going to be a further rate hike as domestic demand does not slow as the RBA forecasts,'' said Sue Trinh, a currency strategist at RBC Capital markets in Sydney. ``The market will want to test the high'' in the Australian dollar versus the U.S. dollar, she said.
The Australian dollar rose to 95.17 U.S. cents, the highest since March 1984, before trading at 94.93 cents as of 4:47 p.m. in Sydney. It gained from 94.63 cents immediately before the report was released and 94.34 cents late in Asia yesterday. Its previous high was 94.98 cents touched on Feb. 29. The currency may climb to 95.20 cents today, Trinh said.
Australia's dollar also gained against Japan's currency, rising to 97.80 yen from 97.34 yen late yesterday. It reached 97.99 yen, matching its April 21 high, which was the strongest level since Feb. 29. The currency may advance to 98 yen today, Trinh forecast.
Fastest Since 2001
Consumer prices rose 1.3 percent from the fourth quarter, when they gained 0.9 percent, the Bureau of Statistics said in Sydney. The median estimate of economists surveyed by Bloomberg News was for a 1.1 percent advance. The 4.2 percent annual gain was the fastest since the second quarter of 2001.
The RBA raised borrowing costs a quarter-point in February and March to cool inflation and bring the annual consumer-price index to between its 2 percent to 3 percent target.
Australia's dollar dropped as low as 90.92 cents on April 4 after Stevens said Australia's headline consumer prices probably rose about 4 percent in the first quarter from a year earlier, which may be the ``peak.''
Australian government bonds fell. The yield on the benchmark 10-year note rose 5 basis points, or 0.05 percentage point, to 6.25 percent. That's 2.54 percentage points more than the similar-dated benchmark U.S. Treasury note. The price of the 5 1/4 percent note due March 2019 declined 0.333, or A$3.33 per A$1,000 face amount, to 92.162.
Seventh Day
Australia's dollar gained for a seventh day versus the yen, the longest run since July 20, as the odds of an RBA rate increase after its next meeting on May 6 rose to 30 percent from 10 percent yesterday, according to a Credit Suisse Group index based on interest-rate swaps. A similar index showed traders have begun pricing in a rate increase in the next 12 months.
Technical charts suggest the currency may rise to 96.50 cents within a month should it stay above 95 cents, said Kengo Suzuki, a currency strategist at Shinko Securities Co. in Tokyo.
Resistance at 96.50 cents is near the Australian dollar's March 1984 high of 96.53 cents, Suzuki said. The so-called Aussie failed to rise above 95 cents in February and March, so a break of this resistance shows it may gain further, he said.
``We're near an important resistance level that the Aussie has failed to break in the past,'' Suzuki said. ``The signs are all pointing toward a bullish trend, and the Aussie's gains could accelerate quickly.''
Stochastics and moving average convergence/divergence charts are providing a signal to buy the currency, Suzuki said. Resistance is a level where sell orders may be clustered.
