The Australian dollar rose to a two week high after inflation, prompting markets to reduce the chances of a possible interest rate cut later this year. The Aussie increased to $0.9439, which is higher than the $0.9387 last seen on July 10, reports Reuters.
According to the Wall Street Journal, last year Australia's central bank trimmed rates down to a record low 2.5% as a mining boom slowed in order to accelerate flagging growth. Now futures markets are pricing in a near 50% possibility that the next move in rates will drop by the first quarter of 2015.
Kieran Davies, chief economist at Barclays in Australia said, "The market has swung to pricing in the risk of lower interest rates over the next six months or so, but we still think that the RBA will keep the cash rate on hold at 2.5% this year and raise them modestly next year as the economy improves," according to the Wall Street Journal.
Ahead of expectations for a 0.6 per cent rise, the mean price index rose 0.8 per cent in the second quarter, hiking up the yearly rate to 2.9 per cent. This pushed the Reserve Bank of Australia's 2 to 3 per cent target.
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