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Aussie Dollar Falls on Unchanged Rates

February 2, 2010 at 18:50 by Jan Baros

Australian dollarDespite risk appetite fueling demand for commodities produced in Australia, the Aussie dollar declined after a central bank decision published today showed no rate hikes expected by traders as the country’s economy rebounds.

The Australian dollar broke its 2010 record low versus the greenback after forecasts hoping interest rates to be raised in the country were not confirmed, frustrating traders that opted for other commodity producer’s currencies as the South African rand, after risk appetite reappeared since yesterday following a bearish week in both equities and raw materials markets. The Reserve Bank of Australia was the first wealthy nation to raise interest rates last year when the global slump ended, and the dynamic economy of the South Pacific region allowed both the Aussie and the kiwi to rank among the top performers in currency markets in 2009.

Interest rates in Australia have been for the past months a very important factor regarding its currency rates, and today’s pause on rate hikes certainly decreased appeal for the Aussie. Even if risk appetite avoided a bigger drop for the Aussie, traders are opting for other higher-yielding currencies in foreign-exchange markets today.

AUD/USD traded at 0.8841 as of 16:41, gaining slightly after the interest rate decision pulled the Aussie down and from 0.8881 yesterday. AUD/JPY traded at 79.86 from 80.62.

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

4 Responses to “Aussie Dollar Falls on Unchanged Rates”

  1. piyashrija

    i like to ask when australian dollar going to increase again

  2. Jan Baros

    It will depend on appetite for riskier assets among traders, which depends on the economic performance of Australia’s main trading partners (specially China). It can also happen if the RBA restart the rate hikes temporarily paused.

  3. Sophia

    Isn’t interest rate expected to be raised dramatically at the end of the year, i.e 4.75…so the pause now is only temporally. Can we trust it?

  4. Jan Baros

    it will depend on the Australian economic performance, but i wouldnt bet on a very high rise

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