Aussie to Reach $0.98 in 2010 on Growth, RBA Rates, Capital Economics Says

Australia’s dollar may surge more than seven percent by year-end as the nation’s economic growth gains momentum and inflation pressures prompt the central bank to resume interest-rate increases, Capital Economics Ltd. said.

The so-called Aussie dollar fell as much as 0.9 percent to 90.95 U.S. cents today as Reserve Bank of Australia Governor Glenn Stevens kept the overnight cash rate target at 4.5 percent for a fourth month. The currency may gain to 98 U.S. cents by the close of 2010 after a “strong pick-up” in second-quarter consumption and higher-than-expected retail sales in July, Sukhy Ubhi, international economist in London at Capital Economics, wrote in a report dated today.

“An increase in inflation pressures from above-trend growth and tighter labor market conditions looks only a matter of time,” Ubhi wrote.

Following third-quarter consumer price data scheduled for release in October, the RBA will increase the rate by 25 basis points at its November meeting, with further tightening to 5.75 percent by the end of next year, according to the economist.

The Australian dollar will finish this year at 88 U.S. cents, according to the median forecast of 30 analysts surveyed by Bloomberg. The RBA’s key rate will end 2010 at 4.75 percent and 2011 at 5.5 percent, according to a separate survey.

To contact the reporter on this story: Yuki Yamaguchi at yyamaguchi10@bloomberg.net.

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email