Australian Dollar Boosted by Concern About Inflation

The Australian dollar gained today after the Reserve Bank of Australia announced its plans to raise the interest rates, partially because of concern that the inflation will be spurred by the mining boom.

“The fact that the prospective rise in the terms of trade was now likely to be noticeably stronger than had been expected was a factor suggesting that it might be prudent not to delay”, said the RBA’s officials in the minutes of their meeting. The bank’s officials may increase the interest rates in May in case they’ll find the inflation level troublesome.

The investors, looking for the higher-yielding assets, are attracted to Australia by its high benchmark interest rates, which are at 4.25 percent level, compared with 0.1 percent in Japan and as low as zero in the U.S. Yet they may be turned away in case the volatility in the markets grows as the currency market moves may erase profits.

AUD/USD rose to about 0.9320 as of 21:15 GMT today up from its opening level of 0.9237. EUR/AUD dropped to 1.4414 after opening at 1.4597.

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