A rise in aussie interest rates broadly strengthens the Australian currency

Speculation over an imminent rate rise in Australia sent the pound tumbling yesterday, losing 1.5% to close at 1.8146.

  • The Australian dollar advanced strongly as expectations grew that the Reserve Bank of Australia would move to raise interest rates at its policy meeting.
  • Forecasters were split evenly over whether the Reserve Bank of Australia would keep rates on hold in their meeting tomorrow or wait until November or December to raise rates by 0.25 basis points.
  • Expectations were given a further lift as figures yesterday showed that Australian job advertisements last month rose at their fastest pace since late 2007, fuelling optimism over the country‚Äôs recovery.
  • This morning, the bullish speculators were proved correct as the Reserve Bank did indeed raise the official cash rate from a 49-year low to 3.25%, up 25 basis points.
  • The move makes Australia the first G20 nation to raise their rates following a prolonged period of positive economic activity, and the pair are currently hovering marginally above 1.80.