Aussie $ Boost

The AUD received a welcome boost this week on the back of a $US6 billion rescue mission of the Japanese yen orchestrated by the US Fed.

The AUD climbed almost US2.5 cents from US59.34 cents to US61.70 cents overnight on Wednesday as news of the US Fed intervention on the Yen filtered through. However by Friday morning the AUD was back down to US60.70 due to market concerns that Japanese promises of fundamental economic reforms are still short on details. The market also remembers Japans history of not delivering on promises regarding reform.

All this means that the AUD is still not out of the woods but it is likely to remain in a trading holding pattern of between US58 cents and US62 cents for the next month or until full details of Japan’s proposed reforms become clear.

With respect to our interest rates these developments should finally quash speculation of the Reserve Bank increasing rates to prop up the dollar and we may see those fixed rates that were increased last week being reversed on the back of drops in bond and swap rates.

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