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Chinese Rate Hike has Little Impact on AUD/USD

For the third time in 4 months, the Chinese authorities hiked the interest rate. The timing is a surprise, as nation is still celebrating the Chinese new year. But on the other hand, this move was widely expected, and isn’t the first of its kind, so the impact is rather minor.

AUD/USD fell from 1.0180, which is a resistance line anyway, down to 1.0113 but was quick to recover up to 1.0170, a level seen earlier in the day. No major barriers were breached. Also other currencies had a limited reaction to this Chinese move. The “prudent” Chinese policy is expected – this is part of their plan for 2011, following a period of loose monetary policy.

For more about the Australian dollar, see the AUD USD forecast.

In other Australian news, the NAB Business Confidence scored 4 points, higher than last month’s minus 3 points. This helps the Australian dollar. Stronger support for the Aussie comes from the rise in commodity prices, especially copper.

Also the price of gold is on the rise. Gold jumped to a price of $1367 per ounce, the highest in three weeks. Last week’s RBA statement was also positive – Glenn Stevens dismissed the impact of the floods on the Australian economy, and provided an optimistic forecast for the future.

Australia already has a high interest rate of 4.75%. While further hikes aren’t expected in the near future, the current yield is already enough to provide support.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.