FOREX-Aussie hits highest since 1983 vs dollar post-RBA

* Aussie rallies to $1.0013 after RBA surprise rate hike

* Dollar suffers, weighed by QE speculation before Fed

* Investors anticipate results of U.S. midterm election

(Adds comment, updates throughout)

By Naomi Tajitsu

LONDON, Nov 2 (BestGrowthStock) – The Australian dollar hit its
highest against the dollar since 1983 on Tuesday after a
surprise Australian interest rate hike, while the U.S. currency
stayed weak on expectations of fresh monetary easing.

The Reserve Bank of Australia raised its cash rate by 25
basis points to 4.75 percent as a pre-emptive strike against
inflation, sending the Aussie above parity to $1.0013, its
highest since the currency was floated in 1983. [ID:nSGE6A106T]

The RBA’s move increased the interest rate differential
between Australia, where rates are rising, and the United
States, where the Federal Reserve is widely seen as easing
policy further on Wednesday to help stimulate the economy.

Analysts said this view would support the Australian
currency while providing one more reason to dump the dollar,
which already has suffered on speculation that more Fed easing
will further weaken the currency.

“We’re entering uncharted territory, but the Aussie has
staying power up here,” said Carl Hammer, chief currency
strategist at SEB in Stockholm.

“We see it trade above parity in the mid term, as there’s
also the issue of general dollar selling.”

Investors also anticipated results of U.S. midterm
elections, with analysts saying the dollar may initially gain
slightly on relief after clearing a hurdle in a week piled high
with event risk.

By 0855 GMT, the Australian dollar traded 1.4 percent higher
on the day at $1.0001. Near-term gains were seen limited by
stop-loss orders seen around $1.0015.

The euro (EUR=: ) rose 0.4 percent to the day’s high of
$1.3966, with talk of demand of a semi-official European name
helping boost the single European currency.

The U.S. currency (.DXY: ) fell roughly half a percent to
76.957 versus a currency basket.

The euro crept closer to $1.40, a level which has provided
key resistance in past weeks.

While the market remains extremely short of dollars,
participants believe those positions have been pared back in the
lead-up to the midterm elections, whose results start to come in
later on Tuesday, and the Fed’s policy decision the next day.

Markets are generally priced for the Fed to commit to buying
at least $500 billion in Treasury debt over the coming months.

Much uncertainty surrounds the scope and pace of bond
purchases, however, leaving the dollar vulnerable to choppy
moves in prevailing ranges.

“If the Fed’s purchase is smaller than $500 billion, there
will be more dollar buying in the near term, though I suspect
the dollar will remain under pressure on expectations that the
Fed will eventually expand its asset purchases,” a trader at a
U.S. bank said.


Multimedia report on run-up to the Fed meeting:

Top News-U.S. elections:


With the euro’s triangle holding pattern since mid-October
firmly in place, the lower end of the triangle around $1.3750-70
is seen as a support and a good entry point for those betting on
a break above the triangle after the Fed meeting.

The dollar edged up 0.1 percent to 80.56 yen (JPY=: ), though
still in sight of the record low of 79.75 yen set in 1995. The
risk of Japanese intervention to weaken the yen expected to
mount if the dollar slips below 80 yen.

(Additional reporting by Tokyo Forex Team)

FOREX-Aussie hits highest since 1983 vs dollar post-RBA