Aussie Gains Of Fed Rate Cut

The Australian dollar gained yesterday after the Federal Reserve announced an emergency rate cut from 4.25% to 3.50%. It also continued to gain today through the most of the Asian trading session, but has already went down past the daily opening price.

The main idea behind the Aussie’s (AUD) growth is in the expectations by the majority of traders to see the Reserve Bank of Australia increasing the main interest rate during the February 5 meeting. That would widen the interest rates gap between the USD  and AUD to 3.50%.

The release of fourth quarter (2007) consumer price inflation showed a very strong growth, forcing the central bank to tighten the monetary policy.

CPI report showed that the consumer inflation rose up 0.9% compared to third quarter, while the year-to-year comparison shows a 3.0% growth of prices.

Yesterday AUD/USD rose from 0.8614 to 0.8683 (almost 1% gain), while today after a short-term growth 0.8741 it fell down a little and is now hovering near the 0.8675 mark.