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Tuesday in Asia, the Aussie surged up to fresh multi-month highs against its U.S., European and Japanese counterparts after the release of the minutes of the Reserve Bank of Australia's October meeting showed that the board members saw evidence of improving economic conditions both at home and abroad when they voted earlier this month to raise interest rates.
The Aussie also showed strength against the currencies of New Zealand and Canada.
The Reserve Bank of Australia Governor Glenn Stevens and his board unexpectedly raised the benchmark rate by a quarter percentage point to 3.25 percent on October 06, becoming the first Group of 20 nation to increase borrowing costs.
Australia's central bank said it may be "imprudent" to keep interest rates near a half-century low, underscoring Governor Glenn Steven's determination to increase borrowing costs to avoid a surge in inflation.
A "very expansionary setting of policy was no longer necessary, and possibly imprudent," officials said in minutes of their October 6 meeting, released today in Sydney. Board members also said it was likely gains in the nation's currency would "help contain inflation," which they said may be accelerating by 2011.
''Keeping interest rates at very low levels for an extended period could therefore threaten the achievement of the inflation target over the medium term,'' the minutes added.
"Overall, the information becoming available over the past month had provided further evidence that the outlook for the domestic and global economies was continuing to improve," the minutes said.
Board members noted that domestic economic conditions had been "noticeably stronger than had earlier been predicted," and that most forecasts for economic growth had been upwardly revised.
A further rally in stock prices on the back of some better-than-expected earnings reports also boosted the Australian currency.
In Asia, Japan's Nikkei 225 index gained 0.7%, Australia's S&P/ASX 200 index rose 1.25%, South Korea's Kospi climbed 0.3%, New Zealand's NZX-50 index jumped 0.9%, China's Shangai Composite index strengthened 0.8% and Hong Kong Hang Seng had added 0.6%.
U.S. crude futures edged up today to a one-year high near $80 a barrel on a weak dollar and firm U.S. stock market.
Strong earnings have boosted U.S. equity markets, with the Dow industrials up another 1 percent on Monday, beating down the dollar to a fresh multi-month lows to make a range of commodities more appealing for non-dollar buyers.
Apple became the latest company to report solid quarterly numbers, after the close of New York markets on Monday.
U.S. crude for November delivery rose 34 cents to $79.95 a barrel at 10:25 pm ET, its highest since October 14 last year. London Brent crude rose 36 cents to $78.13 a barrel.
During Asian deals on Tuesday, the Aussie rose above the 0.93 level against the U.S. currency for the first time since August 08, 2008. The aussie-greenback pair climbed to 0.9314 at 8:30 pm ET, compared to yesterday's close of 0.9292. On the upside, 0.940 is seen as the next target level for the Australian dollar.
After hitting a 5 1/2 -year low of 0.6012 in October 2008, the Aussie strengthened 35% against the U.S. currency as prospects of a global economic revival spurred demand for higher-yielding assets.
The Aussie climbed to a 16- 1/2 -month high of 1.6087 against the euro in Asian trading on Tuesday. The next upside target level for the aussie is seen at 1.593. At yesterday's close, the euro-aussie pair was quoted at 1.6121.
The Australian dollar has been steadily gaining against the euro after it touched a new multi-year low of 2.1142 in October 2008. Since then, the aussie has appreciated 24% against the euro.
In Asian deals on Tuesday, the Aussie jumped to a 12 - 1/2 -month high of 84.36 against the yen. If the Australian currency advances further, it may target the 85 level. The aussie-yen pair was worth 84.14 at yesterday's close.
Thus far this year, the aussie-yen pair has advanced 25%.
The Aussie that closed yesterday's trading at 0.9556 against the Canadian dollar strengthened to 0.9577 in Asian deals on Tuesday. The next upside target level for the aussie-loonie pair is seen at a 14-month high of 0.9583 and if the pair breaches this level, it may target the 0.980 level.
During Asian deals on Tuesday, the Aussie soared to 1.2333 against the New Zealand dollar. The near term resistance for the aussie-kiwi pair is seen at 1.244. The pair closed yesterday's trading at 1.2278.
Traders are now likely to focus on the European session, in which the German September PPI, Italian industrial orders for August and the Euro-zone construction output for August are expected.
From the U.S., the PPI, housing starts and building permits report- all for the month of September have been scheduled for release at 8:30 am ET.
At the same, the Canadian wholesale sales for August and leading indicators for September are due for release.
At 9:00 am ET, the Bank of Canada is scheduled to announce its interest rate decision. Analysts expect the central bank to keep rates steady at 0.25%.
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