South Pacific Dollar Gains on China Rate Cut

By TraderVox.com

Tradervox.com (Dublin) – The south pacific currencies have gained after China decreased its interest rate to 3.25 from 3.5 percent which was sent in 2008. The Australian currency increased beyond parity against the US dollar in three weeks as demand for riskier assets was boosted by this change in monetary policy. However, its advance was limited after the Federal Reserve Chairman Ben S. Bernanke refrained from indicating whether the Fed would add stimulus during his testimony yesterday before US lawmakers. The New Zealand currency also increased against the yen the as Asian stock continued to advance for the fourth day.

According to Omer Esiner, the south pacific currencies have been short in the last couple of weeks and the current rally was expected. This has also been facilitated by the less bullish sentiments from the Fed Chairman Ben Bernanke. The People’s Bank of China reduced its benchmark for one-year deposit rate by 0.25 percent which will take effect tomorrow. The bank is also expected to cut the one-year lending rate by the same margin later in the year. The New Zealand dollar which has increased since the beginning of the week has been propelled by positive sentiments from euro area as well as the rising Asia Pacific Index of shares which has advanced by 1.3 percent. This has also boosted the demand for riskier assets hence strengthening commodity related currencies.

Other factors that buoyed the Australian dollar include the nation’s payrolls which increased unexpectedly by 38,900 in May according to a report released by statistics bureau. Australia’s Gross Domestic Product data also has been influential in the current surge of the Aussie.

The Australian dollar increased  by 0.8 percent against the US dollar to trade at $1.0003 before dropping by 0.3 percent to trade 98.94 US cent. The Aussie was up against the Japanese yen by 0.2 percent to exchange at 78.79 yen.  The New Zealand currency also increased against the dollar before dropping by 0.5 percent to trade at 76.72 US cents. It increased by 0.1 percent against the yen to trade at 61.09 yen.

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