I wrote back on Sept. 28th that there was some speculation of an Aussie Rate Hike, and yesterday it happened. Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent, the lowest it had been in 49 years. What surprised me most about this news was not that it happened, but rather that 1 out of 20 currency analysts surveyed by Bloomberg predicted it!
Readers of this blog had a one week headstart!
Well enough back-patting for me now, as I’ve made plenty of wrong calls in the past. But what this means is that there will be further strength for the Aussie (AUD) which also means weakness for the US dollar (USD) and Japanese Yen (JPY).
However, there has been a lot of Yen jaw-boning recently from Japanese officials about possible intervention so be careful with AUD/JPY. Stick with AUD/USD if you want to participate in the carry trade.
I mentioned recently in another article that the US Fed and Bernanke may have to take action to halt the US dollar decline, but it doesn’t appear that they’re ready to do so.
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