Dollar soars as rates stay unchanged

The Australian Dollar reached a six-month high against the greenback of $US1.081.
The Australian Dollar reached a six-month high against the greenback of $US1.081.

THE Reserve Bank's shock move to leave its key cash unchanged served as rocket fuel for the Australian dollar, propelling the currency to record highs.

The dollar leapt to as high as 82.38 euro cents - a record against the euro zone currency. It also touched 68.3 pence, a 27-year high against the UK currency, and it reached a six-month high against the greenback of $US1.081.

"We saw a sharp jump (after the RBA announcement) and we expect that to be extended in the offshore session," said ANZ currency strategist Andrew Salter. "Given the tone of the statement and the decision not to cut, we would expect the Australian dollar to be well-supported overnight."

The central bank's decision to pause in its rate cutting was immediately interpreted to mean the RBA was a lot more confident about the outlook for the economy than than many had anticipated. Interest rate futures, for instance, had been tipping as many as four typical interest rate cuts over the coming year before today's decision - that's been chopped back to about two cuts.

The relative health of the Australian economy - and the Australian dollar - well-placed to benefit from any revival in the US and Europe, as well as any signs that Chinese growth may slow less than pundits had forecast.

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Topics:  australian dollar reserve bank of australia

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