Why does Oz interest rate rise mean that the $ gets stronger??
 

According to the Brisbane Courier Mail:

http://www.couriermail.news.com.au/c...55E952,00.html

interest rates are likely to be increased in March and again in April.

A currency broker is saying this speculation is causing the AU$ to be so strong at the moment.....I am confused :confused: why would it do this? Shouldn't it make the $ weaker??????

If the interest rates DO go up twice as they are predicting, will this mean I get more or less $ for my £???????

Thanks
carole and chris:)

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

Cos if you were a currency trader, where would you rather have your money? Somewhere with high interest rates (and therefore lots of interest on your billions of dollars), or somewhere with low interest rates, and your billions just stagnate.

Its a supply and demand thing, if the interest rates go up in Oz, lots of companies and currency traders will want to buy Aussie dollars to get the interest, thus making dollars more expensive to buy.

It means you will get less $ for your pound, unless the UK do something similar with their interest rates.

Cheers,
JTL

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

Thanks JTL!
Yes that makes complete sense!!!!!!!!!!!!!! :o
So we need the UK to put their interest rates up too!!!!!!!!!!!:)

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

Yep, if you want more $s to the £.

But note that one of the problems with the £ <-> AUD is that they generally fluctuate on different criteria. So, although interest rates will make a difference, the AUD is affected strongly by commodity prices, while the £ is affected by services and is strongly tied to the US$ and Euro.

Regards
Alistair

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

The trouble with that is if the UK ups the interest rate then new house buyers won't be able to afford to borrow as much and thus won't be able to pay as much for a house. This then feeds through the housing market. So you might get a better rate when you transfer your equity to Aussie$ but you will start with a lower GBP figure when you sell your house. Granted this can take a while to filter through but in essesnce it is swings and roundabouts.

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

More like a rollercoaster at the moment ;) but yep, a change in rates here will effect the exchange rate and the house prices. However, the financial markets will move in expectation of a change in the future - the general house buying public tends to act after the change (not always before someone disagrees ;) ), so there may be a time difference between the effects. Also depending on how much equity you have in your house, one effect will be bigger than the other for each person as to which is right for you :confused:

If I knew all these answers then I would be retired on a beach somewhere by now having made my millions :D

Alastair

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

Points all taken......s'pose we are thinking slfishly as we have sold our house already!!:o

carole :)

Re: Why does Oz interest rate rise mean that the $ gets stronger??
 

http://www.smh.com.au/news/National/...229935268.html

Home loan rates to rise

By Matt Wade
February 15, 2005




Home borrowers face higher interest rates for fixed-rate mortgages as financial markets react to the likelihood of a rise in official rates within weeks.

Eight lenders have lifted three-year fixed rates in the past week, including Citibank and HSBC, consumer information firm Infochoice.com.au says. The increases ranged from 0.1 per cent to 0.3 per cent. The average three-year fixed interest rate on offer from lenders has risen from 6.66 per cent in mid-December to 6.7 per cent.

Last week the Reserve Bank said the likelihood of a rate rise in the next few months had increased due to inflationary pressures. The warning caused the interest rates on short-term bond contracts traded on financial markets to jump sharply and investors have now factored in a 0.25 percentage point interest rate increase in early March followed by another by June.

The bond contracts that banks and other lenders use to finance fixed loans have also been rising, pressuring lenders to lift the rates on fixed-rate products.

However, new borrowers are not rushing to "lock in" their interest payments by opting for fixed mortgages. "There's no uptick in demand for fixing at this stage," an ANZ spokesman, Paul Edwards, said.

The dollar closed half a cent higher at US78.54c amid the news.