RBA gives signs of increasing cash rate

RBA governor Glenn Stevens said Australia's economic growth has been robust and should be above trend in 2011, the low rate of inflation over past two years also expected to go up in coming years.

Obviously, the  central forecast might be wrong. Something could come out internationally or nationally that affects the outcome. But if downside possbilities do no materialise, cash rate will be depended on monetary policy to manage the robust upswing. Mr Stevens also believes the growth will continue to escalate due to high export prices and "the largest minerals and energy boom since the 19th century".

RBA rapidly increased the vash rate from three per cent to 4.5 per cent, in six increments between last October to May. While, the inflation rate fell from 4.7 per cent in September quarter of 2008 to 2.7 per cent at June 2010.

Australia Dollars Rises to New Record

The Australian dollar  made to new levels that had not seen since mid 2008 before the start of the global financial crisis - as traders felt more confident from ever-more encouraging economic data out of the US. The AUD touched a peak of 94.57 US cents, climbing almost a full US cent on September 15th. Its rise was largely on the back of a fall in the value of the greenback. 

It has come back a little in recent offshore trade but was this morning still buying 94.2 US cents after hovering around the high 93-US-cent range earlier. It was also trading at 72.32 euro cents, just off a record high achieved in recent sessions.

Since 3th of September, AUD has risen more than 4%. The AUD benefits when international investors and traders believe the signs are good for the global economy. US retail sales figures out overnight were a welcome sign, indicating a double-dip recession in the world's largest economy was less likely.

The Aussie dollar is closely linked to commodities prices - and commodities sales benefit when economies are growing  because demand is high. That in turn bolsters the value of the dollar against many foreign currencies. The AUD's worth depends heavily on the international factors and a fall in the value of the USD was a gift.

USD weakened against the yen, euro and British pound after Goldman Sachs economist Jan Hatzius predicted that the US central bank, The Federal Reserve, would probably begin buying $US1 trillion worth of Treasury bonds later this year.

The practice known as quantitative easing aims to spur growth in the US economy. But the flood of USD into economy weakens the currency and that in turn prompts traders to seek alternative investments, including gold and some other currencies.