AUD/USD rises on speculation about RBA
AUD/USD is likely to show gain this week continuing the growth seen in September. The pair reached levels above $0.9500 on Sept. 18-19. The pair’s currently trading above $0.9400.
Analysts at Westpac believe that Aussie’s advance may be explained by the housing bubble. As the Australian housing prices growth is gaining pace, the RBA might follow the example of the RBNZ which announced recently that “it expects to raise rates by 2% between 2014 and 2016 to combat the rising prices in the housing market.” Higher interest rate is positive for the domestic currency. So, the reason of Aussie’s strength is probably that the market’s pricing in the idea that the RBA will also hike rates “sooner” than later”. According to data from Credit Suisse, traders are not pricing in any further RBA interest rate cuts over the coming 12 months.
RBS points out that the latest talk is that the new Australian government will increase fiscal spending – this may be another reason for the Reserve Bank to end the policy of low rates.