US rate cut pushes up dollar

The US Federal Reserve’s interest cut on Wednesday has certainly made itself felt in Australia, with the Australian dollar sitting at 64.20 US cents at lunch on Friday. This contrasts sharply to late August, when the Australian dollar hit its all-time low of 56.07 US cents.

The main cause of this increase is the fact that three successive interest cuts in the US has brought the US reserve rate to below that of Australia. This means that Australia become more attractive to investors, and as a result, pushes up the dollar. Historically, the US rate has been above the Australian rate, so this repositioning can be seen as having a strong effect on the currency.

Analysts have predicted that the Australian dollar could go as high as 70 US cents in the next six to nine months, with the majority expecting the dollar to stabilise at around 65 US cents.