The Australian dollar is higher despite the US rate hike

Suggesting that a US interest rate hike was all but expected by markets, the Australian dollar is largely unchanged in early asian trade this morning.

As at 8.30am AEDT, the AUD/USD currently buys .7220, down slightly on the .7228 level it was trading at shortly before the Fed’s interest rate decision was announced.

While there was initial volatility around the Fed decision – the Aussie traded in a range between .7178 to .7279 in the hour following the announcement – in the end it finished the session fractionally higher than where it started it.

As my colleague Greg Mckenna pointed out earlier this morning, “the Fed appears to have managed expectations perfectly and delivered a rate hike which is so benign that forex markets are still trying to figure out whether they buy or sell the US dollar”.

Essentially, the rate hike was completely priced in before it was delivered, as was the small downward revision to the expected pathway for US interest rates offered by FOMC members.

Reflecting this view, Ray Attrill, global co-head of FX strategy at the NAB, wrote that “by and large the Fed has delivered on market expectations” in his morning note.

While they will continue to trade into the Christmas/New Year break, Attrill suggests that market participation is now likely to drop in the days ahead.

“With the Fed now just about behind us, the last key event risk of 2015 has (hopefully) passed and participation across financial market will now be in serious wind-down mode,” he wrote.

For those who are interested, data releases today include New Zealand Q3 GDP at 8.45am AEDT while the RBA will publish its latest bulletin at 11.30am AEDT.

Later in the session markets will also receive German business confidence, UK retail sales along with the Philadelphia Fed business survey, current account and weekly jobless claims data from the US.

Here’s the current Aussie dollar scoreboard.

  • AUD/USD 0.7220 , 0.0029 , 0.40%
  • AUD/JPY 88.26 , 0.78 , 0.89%
  • AUD/CNY 4.6730 , 0.0276 , 0.59%
  • AUD/EUR 0.6617 , 0.0037 , 0.56%
  • AUD/GBP 0.4814 , 0.0034 , 0.71%
  • AUD/NZD 1.0641 , 0.0029 , 0.27%

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