Aussie Heads Higher on China Rate Cut

  June 07th, 2012 at 13:21, Miranda Marquit

Australian coins and banknotesChina announced, in a surprise decision, that it is cutting its interest rate. The announcement helped maintain risk appetite from yesterday, and provided a boost for the Australian dollar. Aussie is seeing gains today as a result of the Chinese policy decision.

One of Australia’s biggest export markets is China, and the Aussie has been struggling a bit as China’s economy slows more than expected. Today, though, China unexpectedly announced that it would cut rates in an effort to help stimulate the economy. With economic stimulus a reality, the Australian dollar is expected to do better on the Forex market. Also, other rate decisions are helping the situation, as Britain and the eurozone keep their rates on hold.

Indeed, Aussie is higher against its major counterparts. Risk appetite is also helping, as investors become a little more comfortable with riskier — higher yielding — assets. Australian dollar still has a relatively high rate, even after the recent RBA decision. So, for now, the Australian dollar is likely to continue to find some support, although things could easily change if bad news predominates in the next few days, or if Europe implodes. But, for now, the Aussie is likely to see success.

At 1:16 GMT AUD/USD is up to 0.9989 from the open at 0.9909. EUR/AUD is lower at 1.2616, down from the open at 1.2688. GBP/AUD is lower at 1.5597, down from the open at 1.5620.

If you have any questions, comments or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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