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Fed stimulus boosts $A

Reported by AAP
Thursday, December 13, 2012
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The Australian dollar has moved to a fresh three-month high after the US Federal Reserve announced new measures to stimulate the world's largest economy.

At 0700 AEDT on Thursday, the Australian dollar was trading at 105.61 US cents, up from 105.32 cents on Wednesday.

The currency rose as high as 105.87 US cents overnight after the Fed announced it would continue buying long term bonds following the expiration of its `Operation Twist' debt purchasing program.

The central bank will continue to spend $US45 billion ($A42.95 billion) a month on long term bonds, a move designed to keep lending rates low and stimulate spending, but it will no longer cover the cost of the purchases through the sale of short term debt.

That will see the Fed's balance sheet expand but will also pump more money into the US economy.

The Fed also indicated it would keep short term interest rates close to zero until the unemployment rate, currently at 7.7 per cent, fell to 6.5 per cent.

HiFx senior trader Stuart Ive said the announcements pushed the US dollar lower against its Australian counterpart.

"The US dollar has weakened across the board against the major currencies," he said from Wellington.

He expected the Australian dollar to continue moving higher, possibly hitting 106 US cents on Thursday.

"The US going into more quantitative easing means that, against the US dollar at least, the Australian dollar has the potential to go higher and I think it will do so."

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22/10/2014 12:34Sydney, Australia. 22 October,2014
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