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Australian dollar swings after Fed rate decision
Published on 16.06.2016 11:20

The Australian dollar has taken a wild ride over the last 24 hours after yesterday’s interest rate decision by the US Federal Reserve.

At 8.56am (GMT) the Aussie dollar was trading at US73.56c down from US73.98c in yesterday’s trade.

The Us Fed kept rates on hold yesterday at 0.5 percent as most had predicted but the following monetary statement was quiet dovish and sent the Australian dollar smashing through the US74c mark.

Fed president Janet Yellen kept everybody guessing with her speech after the announcement by failing to give a definite time, if at all on the timing of another rate rise,

"I'm not comfortable to say it's in the next meeting or two, but it could be," Yellen told a press conference.

"It's not impossible that by July, for example, we would see data that led us to believe that we are in a perfectly fine course .We do need to make sure that there's sufficient momentum,” she added.

Unlike other rate hiking cycles many see this much different with the movements coming more slowly and not as many as in previous times,

“This will not be like traditional rate-hike cycles -- it will not only be gradual, but it’s to a much lower destination,” Richard Clarida, global strategic adviser at Pacific Investment Management Co.

 “This recognizes that the potential growth rate in the economy has really slowed, it’s slowed globally.” He added.

The key to the Australian dollar’s strength will be tomorrow’s unemployment report with a disappointing number likely to force another interest rate cut from the RBA which in turn will see the local currency weaker.

Andrew Masters


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