The Australian Dollar is higher after the Reserve Bank of Australia (RBA) said it was likely to increase interest rates in order to curb rising inflation. It was the second consecutive rise in forex trading as the RBA increased its inflation forecast in its quarterly statement, prompting investors to speculate on a futher interest rate rise to add to last weeks 25 basis point increase to a 12-year high of 7 percent. ''This hawkish statement is certainly Aussie positive as it gives some forward guidance that unless there's a further deterioration in the global outlook, higher interest rates will be required,'' said Joshua Williamson, a senior strategist at TD Securities Ltd. in Sydney. ''The Australian dollar is a high- yield story for the rest of the year at least.'' The higher Australian Dollar has been boosted over the past couple of weeks through interest rate rises by the RBA and interest rate cuts by the US Federal Reserve. The high Australian Dollar will be expected to rise further if its interest rate differential continues to widen against the US Dollar.

In the fourth quarter of 2007, the headline annual inflation rate stood at 3 percent while underlying core inflation rates were hovering at 3.5 percent. The Reserve Bank of Australia considers an inflation rate between 2 to 3 percent as a stable level.

In forex trading, the Australian Dollar is higher at 90.19 US cents, higher from a previous trade of 89.75 US cents.