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The Australian Dollar exchange rate traded between the 1.805 and 1.825 mark to the Pound during the week of the 2 November and the 6th of November. Similarly, the Australian Dollar traded between the levels of 1.100 to 1.114 to the US Dollar.

Last week saw the Reserve Bank of Australia (RBA) once again raise its official cash rate by 25 basis points to the 3.5 % level as economic conditions were stronger than expected. Investment, population growth and buoyant trade levels were the reason behind the upgraded forecasts. The upward revision reflected stronger economic data since August and an improved outlook for the local economy.

The rate has been increased for the second time in 4 months, and the RBA is the only central bank to do so twice in a year. Australia already has the highest rates in the developed world at 3.5%. The RBA said the rate hikes in the October and November meetings would help keep inflation within target levels over the coming years. Headline inflation is expected to rise somewhat and target inflation levels are expected to be consistent with the target ranges set for 2010.

The Australian Dollar ended the week on a high, as investors sentiments were that the interest rates and the currency will increase further in the coming months. Some believe that future rate rises will happen in quicker succession if the economic growth is faster than expected. The appreciation in the Australian Dollar will dampen the price pressure on the trade sector. Some however, believe there may be a bleaker outlook as interest rate hikes have the potential to curb the growth in the retail sector and damage consumer confidence in the lead up to the Christmas season.

The Australian Dollar hit a 3 month high against the New Zealand Dollar in the last week and this is a testament to Australia’s robust economy and its ever-growing yield allure. New Zealand’s economy has taken a hit after the RBNZ warned of a slow and vulnerable recovery. One thought is that this is largely due to the Reserve Bank of New Zealand vowing to keep interest rates at a low 2.5% until mid 2010.

Composed by Taahirah Williams
:: Note: The above exchange rates are based on “interbank” rates.