China surprises with interest rate hike
(6 April 2011 – China) The Australian dollar has fallen against the US dollar, rattled by China’s decision to increase interest rates by 25 basis points.
This hike in interest rates has pressured some commodity currencies sensitive to global growth, and the move further fuelled worries about global growth slowing.
Credit Agricole CIB senior foreign exchange strategist Adam Myers told The Wall Street Journal from London that "the whole global-growth, commodity trade looks a little riskier," since the hike.
The euro gained against most of its rival currencies and investors geared up for a widely expected rate hike from the European Central Bank later this week.
The Australian bond market was also weaker after the announcement.
RBC Capital Markets fixed income and currency strategist, Michael Turner, said the Australian market outperformed US Treasuries thanks mainly to a Chinese interest rate rise.
China raised its key interest rate for the fourth time since October, which took the one-year deposit and lending rates to 3.25 per cent and 6.31 per cent respectively.
'(It was) a pretty interesting night,' Mr Turner said.
'We outperformed the US (and) US Treasuries were reasonably pressured heading into the FOMC minutes.
'We didn't quite go the entire way - China hiking early in the evening would have had something to do with that - and gave our market a modest bid and we didn't go with the sell off to any large degree.
'The actual move on the minutes was not that great but the damage was done before that.'
Credit Agricole CIB senior foreign exchange strategist Adam Myers told The Wall Street Journal from London that "the whole global-growth, commodity trade looks a little riskier," since the hike.
The euro gained against most of its rival currencies and investors geared up for a widely expected rate hike from the European Central Bank later this week.
The Australian bond market was also weaker after the announcement.
RBC Capital Markets fixed income and currency strategist, Michael Turner, said the Australian market outperformed US Treasuries thanks mainly to a Chinese interest rate rise.
China raised its key interest rate for the fourth time since October, which took the one-year deposit and lending rates to 3.25 per cent and 6.31 per cent respectively.
'(It was) a pretty interesting night,' Mr Turner said.
'We outperformed the US (and) US Treasuries were reasonably pressured heading into the FOMC minutes.
'We didn't quite go the entire way - China hiking early in the evening would have had something to do with that - and gave our market a modest bid and we didn't go with the sell off to any large degree.
'The actual move on the minutes was not that great but the damage was done before that.'
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