{"id":303005,"date":"2010-02-10T15:20:00","date_gmt":"2010-02-10T20:20:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/the-tightening-cycle-is-about-to-being-again-and-it-will-start-in-australia-2010-2"},"modified":"2010-02-10T15:20:00","modified_gmt":"2010-02-10T20:20:00","slug":"the-tightening-cycle-is-about-to-begin-again-and-it-will-start-in-australia","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/303005","title":{"rendered":"The Tightening Cycle Is About To Begin Again, And It Will Start In Australia"},"content":{"rendered":"

\"australia,<\/p>\n

Last week Australia stunned the world when it decided to pause its series of interest rate hikes. With that single move, it seemed, the tightening cycle had come to a premature end.<\/p>\n

Or maybe it was just a pause.<\/p>\n

That’s what analysts at Hong Kong-based Currency Options Hotline argue in a recent note:<\/p>\n

——<\/p>\n

   Last week, the Reserve Bank of
Australia (RBA) confounded economists’
forecasts — including our own! — by
holding short-term interest rates steady
at 3.75%.<\/p>\n

   This broke a run of 3 consecutive
quarter-point hikes going back to
October.<\/p>\n

   But in retrospect, it’s clear that
the currency markets effectively
anticipated this decision.  The Aussie
actually peaked in mid-January above
US$0.93, and has since fallen about 6.9%
to US$0.8673.<\/p>\n

   That said, the same factors that
have thus far led to 3 consecutive
quarter-point interest rate hikes since
October, still exist.  For example …<\/p>\n

   * The Australian economy is still
     growing strongly.<\/p>\n

   * Consumer spending and employment
     are rising sharply.<\/p>\n

   * Inflationary pressures continue to
     intensify.<\/p>\n

   Because of this, we are pretty sure
RBA’s decision represents only a pause
— not an end — to the rising interest
rate cycle.<\/p>\n

   On top of that, the Aussie’s retreat
to date has left it sitting just above
major support near US$0.865.  To us,
that suggests the A$’s temporary
pullback has probably run its course —
which means the next move is likely to
be back up.<\/p>\n

Join the conversation about this story »<\/a><\/p>\n

See Also:<\/b><\/p>\n