The Australian dollar rode past 89 US cents on Wednesday to near 18-year peaks after strong retail sales data revived expectations that the central bank will raise interest rates sooner than later to check inflation.
Retail sales in Australia rose 0.7 percent in August, beating estimates of a 0.4 percent rise, as consumers kept spending despite a rise in interest rates and turmoil in global financial markets. Other data showed Australia's trade deficit widened more than expected, indicating that the economy was sucking imports at a fast pace as it kept pace with strong domestic demand.
"The retail sales data shows that the economy is not slowing down at all even when credit markets went through all the turmoil in August," said John Kyriakopoulos, currency strategist at National Australia Bank. "The Australian economy is strong and the Reserve Bank will maintain a tightening bias with a high probability of a rate hike as early as next month."
The Australian dollar was quoted at $0.8881/83 against the US currency, compared with $0.8855/58 late here on Tuesday and off a session high of $0.8916. It dipped to as low as $0.8805 in offshore trade after scaling a 18-year peak of $0.8950 on Tuesday.
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