The Australian dollar is likely to edge closer to parity with the US dollar during the next 8 months as the Reserve Bank of Australia (RBA) maintains a tightening bias, attracting investors searching for higher-yielding currencies, Commonwealth Bank chief currency strategist Richard Grace said Friday.
Grace said he has raised his year-end and mid-2008 forecasts to 92.50 US cents and 95 US cents respectively as strength in the global economy and continued robust economic growth in Australia increase the chances of the RBA tightening interest rates. The RBA last raised its target cash rate by 25 basis points to 6.5 percent in early August.
The Australian dollar traded as high as 90.61 US cents overnight, the highest level since the currency was floated in 1984, on roaring carry-trade demand.
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