Australian Dollar Rises to Eight-Week High

The Australian dollar rose to near an eight-week high after private reports signaled increasing inflationary pressures, adding to the case for the central bank to raise interest rates., Bloomberg 1/14/2008 7:55:59 AM

The local dollar climbed against all 16 most-active currencies on speculation the nation's interest-rate advantage over the U.S. will widen, luring investors to Australia's higher-yielding assets. Futures contracts show traders are certain the Federal Reserve will cut its benchmark borrowing cost by a half percentage point this month.

The Australian dollar rose 0.5 percent to 89.57 U.S. cents at 2:24 p.m. in Sydney from 89.09 cents late in New York on Jan. 11, when it touched 89.76 cents, the strongest since Nov. 19. The currency gained to 97.49 yen, from 96.95 yen late last week.

Currency trading will be below average today because of a public holiday in Japan, Johnson said.

Australia's dollar has risen 14 percent in the past year as the rate spread with the U.S. widened to 2.5 percentage points from 1 point. The Reserve Bank of Australia raised its benchmark a quarter point each in August and November to 6.75 percent. The Fed cut rates by a percentage point since September to 4.25 percent.

Australian Dollar Rises to Eight-Week High