Wednesday, December 03, 2008

Australia cuts Rates

Australia cut rates last night from 5.25% to 4.25%. Rates have now been cut 300bp since August and is in line with the continuing deteriorating situation in the markets. The size of this cut is slightly larger then expected but I think totally hustified. I think the Aud will continue to suffer as the market is looking for risk reduction at all costs (many people buy Aud as a high yielder..yes me too!). The statement from the CB left the door open for more cuts in the future but implied that in the future they would be less aggressive. They did state that "Global inflation will moderate significantly in 2009". The Bank did note however, that policy was now “at an expansionary setting” and that the cash rate is now at its “previous cyclical low point” which implies that further rate cuts will not be as aggressive.

Good Luck and Good Currency Trading.



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