Australian Dollar Hits 10-Yr High

SYDNEY ~ The Australian dollar reached a 10-year high against its US counterpart this week on concerns about the US economy and increased speculation about another hike in local interest rates, dealers said.

The Australian currency reached 80.30 US cents in early trade on Tuesday, its highest since December 1996, before easing to 80 cents later in the day.

ABN AMRO currency strategist Greg Gibbs said hawkish comments on interest rates from the Reserve Bank of Australia last week had increased speculation about an interest rate hike.

“The interest rate speculation here since Friday last week has really hotted up,” Gibbs said.

“The other factor is the strength in global equity markets that began (on Monday) in Asia and continued into the US session, and has encouraged global investors to look at the Aussie more favorably.”

He said concerns about the US economy arising from weak figures this month in the sub-prime mortgage market had contributed to a general weakness in the US dollar.

“You’ve seen weakness in the US dollar … certainly over recent days and that’s supported (our) currency as well,” Gibbs said.

He said the Australian dollar could rise further “but a lot depends on the stability of global equity markets.

“The performance of the Aussie does depend on the appetite for high-yield currencies; so provided the appetite is there for high-yield currencies, the Aussie dollar can continue to trade higher.”

However, Deutsche Bank foreign exchange strategist John Horner said he did not expect the currency’s strong run to continue.

“Partly it reflects the weakness of the US dollar we’ve seen over the past few days and the increased chance of an interest-rate hike here domestically,” Horner said.

“I don’t think these levels will be sustained in coming weeks; the commodity price environment and the risk environment will come under pressure.”

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