The Australian dollar closed above $US0.9200 for the first time in more than a year, after investors latched on to hawkish interest rate comments from the Reserve Bank of Australia.
At the local close, the dollar was trading at $US0.9223, up from Wednesday’s close of $US0.9140.
It was a fresh 14-month high for the unit since it touched $US0.9300 on August 5, 2008.
ANZ economist Alex Joiner the unit found renewed energy after RBA governor Glenn Stevens governor Glenn Stevens said it would be a mistake to be ‘‘too timid’’ about raising interest rates as the economy recovers.
‘‘The comments today, although it was nothing particularly new, it reinforced that the RBA wasn’t going to be timid in raising rates,’’ Mr Joiner said. ‘‘There’s going to be one or maybe two rate hikes by the end of this year.
‘‘It sort of firms up expectations of the RBA normalising rates next year.’’
In Perth today, Mr Stevens told an audience at a breakfast function that the period of greatest weakness in Australia was ‘‘probably past’’ and the risks of really serious economic weakness had ‘‘abated’’.
In that environment, the central bank governor said monetary policy needed to be ‘‘recalibrated’’ to reflect the changing circumstances.
Since the speech at 11.00 AEDT, the futures market has fully priced in a 3.75 cash rate by December.
A higher cash rate makes the local unit more attractive to investors because it means a higher return.
On October 6, the RBA became the first G20 central bank to lift its cash interest rate - raising it to 3.25 per cent from 3 per cent, its first rate hike in 19 months.
The local unit has added roughly 4 US cents in the week since then and made only a brief pitt-stop at $US0.9100 cents from late Tuesday until about 1300 AEDT Wednesday.
With no significant economic data due during Thursday’s offshore trade, Mr Joiner said the direction of the local currency would depend on how the US equities perform.
‘‘The improved risk appetite hasn’t helped the US dollar,’’ he said.‘‘But we often see the US dollar come back a bit if that appetite is reversed.’’
AAP