By: Barbara Zigah
The safe haven Swiss Franc remains under pressure in Asian trading today, even as market players took yesterday’s benchmark interest rate hike from China in stride. The Australian Dollar, however, held above parity against the U.S. Dollar, following the news release. While the China rate hike was generally expected by the market, given the increasing costs of energy and food prices and rising inflation, markets had not been expecting any movement from the Chinese central bank during their Lunar New Year holiday, which ended yesterday. The rate hike of .25% on both 1-year deposit rates and lending rates becomes effective as of today.
As reported at 5:02 p.m. (EST) in Sydney, the Swiss Franc slipped broadly, trading against the greenback at .9643 Swiss Francs, a 2½-week low; against the common currency Euro it fell to 1.3144 Francs, a 9-week low. The Australian Dollar traded against its U.S. counterpart at $1.0140, rebounding from the sell-off in response to the China rate hike decision which brought the currency lower to $1.0115. The Australian Dollar is exceptionally sensitive to changes to China monetary policy, as any tightening of their economy will detrimentally impact Australia’s two key exports to China, namely iron ore and coal.