China Raises Interest Rates to Target Inflation
The People’s Bank of China raised interest rates on Tuesday for the second time in little over a month to intensify its ongoing battle against inflation. Though the timing was a surprise, coming on the final day of China’s Lunar New Year holiday, investors were expecting an imminent intervention by Chinese authorities to fight off increasing price pressures and hold off a potential property bubble.
Australian Dollar slips after Chinese rate hike
The Australian dollar fell on Tuesday after a decision by the Chinese central bank to raise interest rates. This move by China fueled speculation that growth in China may slow, driving commodity prices down and hurting higher-yielding currencies such as the Aussie.
The PBOC raised its benchmark 1-year deposit and lending rates by 25 basis points to 3 percent.
Sterling steady but capped by Asian selling
The Sterling held its ground against the US dollar on Tuesday as expectations the UK will need to raise rates soon persist. However, gains were offset by news of Asian selling and the pound lost some ground to the greenback by mid European session.
The pound is now marginally down against the greenback by 0.07 percent, while is down 0.42 percent against the euro. The Aussie is down to 1.0130 versus the greenback from a high of 1.0189 but had dropped to 1.0114 immediately after the Chinese rate hike.
This article has been prepared by Emman Xuereb, at RTFX Ltd.