Will the Reserve Bank of Australia Raise Interest Rates in 2011?

By Greg Holden,

Shutterstock photo


Perhaps sliding past market analyses last week amid the hullabaloo over European interest rates and US Non-Farm Payrolls ( NFP ) was the official rate policy statement by the Reserve Bank of Australia ( RBA ). Not affecting currency values in any extreme way, the RBA nevertheless made a remark which could eventually force a reevaluation by traders investing in the Australian dollar (AUD).

The remark was in connection with the RBA's inflation forecast for the upcoming two years. The potential reevaluation these remarks could foster was a hint that the inflation forecast could see an adjustment that may lead to an interest rate hike during the second half of 2011.

The initial inflation forecast had a rate hike potentially coming at the start of 2012, but fears of runaway inflation grabbing hold may have possibly sped up this monetary tightening schedule. Analysts have commented that inflation in Australia is gaining momentum alongside the expected growth in the labor market as the mining industry boosts output in the months ahead.

The RBA has therefore had to adjust its stance towards its monetary and credit policies , trying to get a rate adjustment priced in ahead of schedule. Forex traders may see the potential from this adjustment as they view the AUD/USD in their online trading platforms with Forexyard to see the recent uptick in value.

The Aussie initially gained ground last Friday as traders largely fled riskier assets, but moved into the AUD as part of this upward adjustment sparked from Friday's RBA rate statement. If this momentum can hold, forex traders may continue seeing some upward mobility in the AUD's pairs and crosses.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Forex and Currencies
Referenced Stocks: NFP , RBA





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