Off the wire
• Roundup: Global problems interconnected, but good base laid for overcoming them, UN chief says  • UN Security Council calls for strengthened efforts to combat trafficking in persons  • Roundup: Canadian stock market rallies on announcement of U.S. Fed's interests rate hike  • Mistrial declared in case associated with black young man Freddie Gray's death  • Slovenia says razor fence possible at any section of border  • New Argentinean government announces decision to scrap foreign currency controls  • Chicago corn, wheat, soybeans lower on expectation of demand reduction  • Roundup: U.S. stocks surge after Fed rate hike  • Roundup: Senior UN official calls for "unprecedented vision" to stop bloodshed between Israelis, Palestinians  • 1st LD Writethru: Gold up ahead of U.S. Fed's rate hike announcement  
You are here: 　 Home

Aussie dollar higher despite U.S. interest rate hike

Xinhua, December 17, 2015 Adjust font size:

The Australian dollar has risen above 72 U.S. cents from subdued market reaction to the U.S. Federal Reserve's first interest rate hike in almost a decade.

At 0700 local time (AEDT) on Thursday, the local unit was trading at 72.56 U.S. cents, up from 72.06 cents at Wednesday's Asian close.

The U.S. dollar initially gained when the central bank raised the funds rate by 25 basis points to between 0.25-0.50 percent, sending the Aussie lower to 71.11 U.S. cents after the announcement.

The Aussie quickly recovered as the U.S. was sold off given the only uncertainty was the pace and trajectory of rate increases, which the Federal Reserve left the upper-bound rate unchanged at 1.25 percent for 2016 while maintaining their projection of a "longer run" 3.5 percent funds rate.

"By and large the Fed has delivered on market expectations, hence a fairly muted reaction," Ray Attrill, National Australia Bank's global co-head of FX strategy, said in his morning note.

Historically, the Aussie has usually out-performed most currencies as the U.S. central bank begins lifting interest rates, however the downward pressure from the disconnect with commodity prices suggests the track record will be tested.

"We suspect that when the dust settles on the Fed's pronouncements (not that much has been stirred up so far) the U.S. dollar will gain a little more traction -and with that the Australian dollar will drop back below 72 U.S. cents," Attrill said, expecting the Aussie to trade near 70 U.S. cents in the coming weeks.

At 0927 local time (AEDT), the local unit was trading at 72.32 U.S. cents. Endit