The Australian Dollar has risen to its highest level in 24 years and the NZ Dollar has made its third weekly advance against the US Dollar on rising speculation of a wider interest rate advantage over the US. The AUD and the NZD are amongst the top five performing currencies against the US Dollar, with the Australian Dollar rising in forex trading for seven straight days which is its longest streak since April. The Australian Dollar has risen a total of 6.1 percent this month, the second best out of the 16 most traded currencies.
''There is a strong argument for the Australian dollar to go higher,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``The yield advantage is dramatic.''
US Federal Reserve Chairman, Ben Bernanke, has indicated that the US Federal Reserve is ready to further cut its three percent borrowing rate in order to stimulate its weakening economy. A further interest rate cut will widen the interest rate differential between other central banks such as the Reserve Bank of Australia (RBA). The RBA is currently adopting a contractionary response due to rising inflation, therefore also assisting in the widening of the country's interest rate differential with the US. It is highly likely to raise interest rates when they meet in the 4th of March to 7.25 percent. This has certainly helped the Australian Dollar rise along with the NZ Dollar as investors using the currency carry trade investment. NZ also has a relatively high benchmark, currently at 8.25 percent.
In forex trading, the Australian Dollar has risen to a 24 year high against the US Dollar, trading to a high of 94.98 US cents, the most since March 1984, before trading at 94.66 cents later during the Sydney afternoon. The Australian Dollar traded at 94.12 the previous day. The currency traded at 99.19 against the Japanese Yen from 100.24. The NZ dollar traded at 81.53 US cents, from 81.40 US cents yesterday. It has risen 1 percent against the US Dollar this week. The currency traded at 85.49 Japanese Yen, compared with 86.70 Yen yesterday. The rising Australian Dollar may continue its trend in forex trading, providing that its inflation continues to rise alongside a weakening US economy.
