By CountingPips
The Reserve Bank of Australia increased its interest rate by 25 basis points today to 3.25 percent and became the first G20 economy to increase its rate since the financial crisis. The decision to raise the cash rate was unexpected by market forecastors and was the first rate change since April 2009 when the RBA decreased the rate by 25 basis points to the 3.00 percent level, a 49-year 
low.
Australia’s Glenn Stevens, Governor of Monetary Policy, said in his policy statement that, “The global economy is resuming growth. With economic policy settings likely to remain expansionary for some time, the recovery will likely continue during 2010 and forecasts are being revised higher.”
Australia’s economy fared better than most others throughout the economic crisis as a technical recession was averted. In 2009, the GDP of Australia has risen for the first half of the year with a 0.4 percent increase in the first quarter followed by a 0.6 percent gain in the second quarter. Stevens said today that, “Economic conditions in Australia have been stronger than expected and measures of confidence have recovered” prompting the rate increase.
The Australian dollar surged after the rate increase news and advanced against most of the other major currencies. The Aussie has reached a new yearly high against the US dollar in forex trading and close to a new high versus the euro.
Also released out of Australia today was trade balance numbers which showed that Australia’s August trade deficit narrowed from July. The deficit leveled at a seasonally-adjusted AU $1,524 million in August from a deficit of AU $1,783 million in July. Imports fell by 3 percent while exports declined by 2 percent in August.
AUD/USD Chart – The Australian dollar surging in trading today against the US dollar after the RBA increased its interest rate by 25 basis points and becoming the first G20 to hike its rate. The AUD/USD is at a 2009 high and pushing towards the 0.9000 threshold.
