The Australian dollar rose to a near eight-week high against a broadly weaker US dollar on Monday and was seen making progress above $0.7700 on expectations Australia's central bank was poised to raise interest rates.
Financial markets are betting with near certainty the Reserve Bank of Australia will announce on November 8 a cash rate rise of 25 basis points to 6.25 percent - near a six-year high and the third time this year the RBA has raised rates.
The Aussie dollar briefly touched $0.7702, a level not reached since September 6 and about a fifth of a cent below its eight-week technical peak of $0.7721 on September 4.
"I think we are going to test towards $0.7780," said Richard Grace, senior currency strategist of Commonwealth Bank of Australia. "We're going to run into a bit of resistance at the previous level of $0.7720 where it tried to break through before. "But I think it's got the momentum to do it this time."
The Aussie dollar was quoted at $7696/99 compared with $0.7642/47 here late on Friday. It ranged from $0.7681 to $0.7702. "The reality is that the market will baulk at $0.7700 in a practical sense for the next day or two," said Peter Pontikis, treasury strategist of Suncorp. "But at the end of the day, you've got more stuff in favour of the Aussie going up than not.
"It is happening when the US dollar is weak. So it's not as if people are buying Aussie for the heck of it, I mean it is a high-yielding refuge from a weak US dollar," added Pontikis. Analysts said sentiment on the Aussie dollar was also buoyed by a hostile $12 billion take-over bid from the world's third-ranked cement maker, Mexico's Cemex, for Australia's Rinker Group Ltd.
The yen also rose against the US dollar in the wake of soft US growth data and as traders looked to the release of a Bank of Japan economic outlook report on Tuesday for clues about when Japanese interest rates will climb further.
Data on Friday showed US economic growth in the third quarter slowed to a 1.6 percent annual rate, its weakest in over three years, bolstering the view the Federal Reserve would keep rates at 5.25 percent for a while yet.
"If this was just the start of the downturn, then it could be argued that the US is on the way to recession," said Mark Tierney, international strategist of Macquarie Bank. "Yet it is much more likely that the downturn is already well advanced.
The Aussie dollar did trade as low as $0.7415 early this month on concerns about the risks a slowdown in the world's biggest economy could spill into a global slowdown, denting demand for industrial metals, a major Australian export.
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