Aussi Gains as RBA Signals Rates Likely to Rise

The Australian dollar rose and government bonds fell after the central bank said it is likely to push up interest rates to slow inflation., Bloomberg 2/10/2008 6:39:17 PM

The currency climbed for a second day as the Reserve Bank of Australia raised its inflation forecast in its quarterly statement, prompting traders to boost bets policy makers will add to last week's increase to the overnight cash-rate target. Australia's dollar appreciated against all 16 most-active currencies as the yield premium of the nation's two-year government bonds over similar-maturity Treasuries increased to a 17-year high.

The currency climbed 1 percent to 90.21 U.S. cents as of 12:09 p.m. in Sydney, from 89.75 cents immediately before the statement and 89.56 cents late in New York Feb. 8.

Australia's two-year bonds fell for a third day after the Reserve Bank said ``monetary policy is likely to need to be tighter in the period ahead.''

The 7 1/2 percent note due September 2009 yielded 6.74 percent, from 6.66 percent before the statement and 6.68 percent late last week. The price fell 0.086, or A$0.86 per A$1,000 face amount, to 101.114.

Aussi Gains as RBA Signals Rates Likely to Rise