Australian Dollar (FXA) Keeps Rising Before Inflation Report

The Australian Dollar (AUD) rallied again today as better than expected corporate earnings added to the risk on sentiment among investors, boosting riskier but higher yielding assets, one of which is the Aussie. The Australian currency was also higher because of expectations of two very important events. One is tonight's Australian Consumer Price Index for the first quarter, which is expected to rise to 3% from 2.7%, thus further strengthening speculation that the Reserve Bank of Australia would have to act to restrain inflationary pressures and keep them under control. Higher inflation will mean that the RBA could hike the rates sooner rather than later, which in turn will make already strong Aussie even more attractive for foreign investors. The other, probably broadly more important event is tomorrow's press conference of the Fed Chairman Ben Bernanke, as he will speak to the press after the FOMC rate decision at 2:15pm. It is the first time in the Fed's 97 year history that such a press conference will be held immediately after the Fed meeting. Investors, of course, will look for any kind of hints and clues that would point to a possible shift in the Fed's policy, but the general expectation still remains for the current dovish direction of loose money. The RBA, in a strong contrast to the Fed, has already raised interest rates several times during last year, reaching to the highest level among the developed nations. And combined with soaring commodities and strong Australian economic growth, it is not a surprise that the Aussie is at a multi-year high against its US counterpart. The AUD/USD currency pair reached all the way to 1.0790, a level last seen in March of 1982 when the Australian Dollar was not even freely floating. The Aussie moved significantly higher against the Japanese Yen (JPY) too, as the AUD/JPY soared from 87.25 all the way to 88.37.