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Australian Dollar Rebounds after Rate Cut

October 7, 2008 at 10:43 by Andriy Moraru

Australian dollarThe Australian dollar got boosted by the central bank’s decision to cut the interest rate by 1 percentage point today and recovered against the other major currencies during the Asian trading session.

Not only the rate cut didn’t act as the usual negative factor for the currency’s valuation, but it also helped the Aussie (a nickname for the Australian dollar) to go up from the record-low values against the Japanese yen, the U.S. dollar and the euro.

In the current situation with the global financial crisis, rate cut is a boon to the economy and thus to the currency. More than that, global central banks may soon follow the Australia’s step and have a series of the emergency rate cuts.

The Reserve Bank of Australia reduced the overnight interest rate from 7 percent to 6 percent — twice as much as analysts forecast. This step was taken to pump more liquidity into the national financial system to avoid the collapse of the large banks and the further worsening of the recession.

AUD/USD rose from 0.7104 to 0.7177 as of 8:33 GMT today after touching as low as 0.6998 yesterday — the lowest since September 2004. AUD/JPY is currently in the negative zone, falling down from 73.51 to 73.25, but during the Asian trading session it went up as far as 75.78 today. EUR/AUD returned to the positive zone, rising from 1.8690 to 1.8826, but it was also correcting during the Asian session, reaching as low as 1.8496.

If you have any questions, comments, or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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