Dollar boosted by rate hike prospect

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The Australian dollar surged to a four-month high in Asia yesterday, after strong unemployment numbers boosted the likelihood of a rate hike before the year is out.

The unemployment rate was seasonally adjusted to 5.1% as 30,900 jobs were added last month. The jobless rate is now the lowest it’s been in more than a year.

Nomura Australia chief economist Stephen Roberts told the AAP that there was an increased chance of a rate rise before the end of 2010.

"There's no real opportunity for them to lower rates at all, so it's all about when they're going to be lifting rates next," he said.

"I think they may get through the August meeting, but I think they'll be back to tightening policy again.

He said the Reserve Bank might wait for more information on the state of the global economy, particularly the US and the ongoing fiscal crisis in Europe.

"But there is a risk, there's definitely a risk, they could raise rates in August,” Roberts said.
The Australian dollar hit US92.34c yesterday.

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