Australian Dollar Hits 3-month High

as US Fed Pumps up Stimulus

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Peter Lavelle, 13.12.2012

Good news if you're currently in Australia, and wish to transfer money to the United States! The Aussie dollar hit a 3-month high against the greenback this week, as America's central bank the Federal Reserve more than doubled its stimulus program.

In addition, Australia's dollar also climbed for the tenth week on the trot against the UK pound.

This week, America's Federal Reserve really threw the kitchen sink at the US economy. It pumped up the total it injects each month by $45bn, taking total stimulus every 30 days to $85bn.

Of course, the intention is to lower interest rates in the US, thereby giving a helping hand to people that want to borrow. Furthermore, with such giant sums being printed, that's a big boost to confidence too.

In addition, the Fed policy is good news for people in Australia that wish to transfer money out of the country. This is because US stimulus has the added effect of lifting up the Australian dollar.

After all, if you're an investor, and the Fed is all but spraying money at you, what do you do with it? You put it where you can get the best return, which, with interest rates at 3.25%, just happens to be Australia.

Looking ahead, we can expect the Aussie dollar to keep climbing against the greenback. This is because, in addition to giving a big boost to its stimulus program, the US Fed for the first time ever linked its policies to a specific economic goal.

Now, America's central bank won't cut its stimulus until unemployment hits 6.5%.

Well, today, US unemployment is 7.8%, meaning there's a long way to go.

So what should you do if you plan to exchange Australian dollars for US dollars, or UK pounds?

Well, first things first, it would be worthwhile keeping an eye on the exchange rate, to make sure the Aussie dollar keeps going in the right direction. You can do that with Google: just enter AUDUSD to get the latest exchange rate (or AUDGBP for the pound.)

Then, when you're happy with the rate, get in touch with a specialist foreign exchange broker. These will offer you exchange rates up to 4.0% better than commercial banks. So, for instance, if you want to transfer a large sum out of Australia, this can make a difference of thousands of dollars in your exchange rate.

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