SYDNEY: The Australian dollar hit another record high against the greenback on Monday; fuelling speculation the central bank will keep interest rates on hold for another month. The Aussie reached US$1.0417 early on Monday, its highest level since being floated in 1983. Despite indications of rising inflation and strong employment, economists expect the Reserve Bank of Australia (RBA) to hold official interest rates steady at 4.75 percent when it meets on Tuesday.
"We expect the RBA have no imminent need to increase interest rates given the need to gauge the economic repercussions from Japan amongst other natural disasters," said currency analyst and Go Markets trader Christopher Gore.
"We also expect the high currency to rate a mention considering its natural hedge against inflationary forces." In its March statement, the RBA said the strong Aussie, which has traded near parity with the greenback for several months, was helping to temper inflation, now at 2.7 percent. Massive summer floods, which were followed by a cyclone, have pushed up the price of fruit and vegetables in Australia, meaning inflation accelerated through March, according to a TD Securities-Melbourne Institute report. At the same time, newspaper and internet job advertisements rose 1.3 percent in seasonally adjusted terms in March, an ANZ Bank survey found.
"This shows that despite the short-term hit to economic output from the supply shocks to resource exports and food production, the underlying growth pulse of the economy remains in solid shape," Josh Williamson, an economist at Citigroup, told Dow Jones Newswires. Australia, the first major Western economy to raise interest rates after the global slump, has hiked its cash rate by 175 basis points since October 2009 as it rides a mining boom driven by Asian demand that helped it dodge recession.
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