High Inflation Hurts Pounds To

Australian Dollars Exchange Rate

Ozzie dollar still rising this week and inflation is on the up too, which brings us to interest rates. Last week they were expected to go down sometime in the near future, this week it's a different story.

Here is this week's report by economics writer Peter Lavelle - 29.07.2011.

Following reports that inflation in Australia rose last month, the pound has lost more than two cents against the Australian dollar in the last week.

Inflation Down Under rose 0.9% in June, ahead of forecasts of a 0.8% increase, prompting economists to speculate that the Reserve Bank of Australia could soon raise interest rates. This in turn fuelled the Australian dollar's rise on the markets, as investors looked forward to the prospect of better returns on Australian bonds.

Commenting on the rise in inflation, chief economist at UBS Australia Scott Haslem said: "Clearly with this sort of inflation there is no respite. The RBA is going to be looking for the first opportunity, or any signs that growth is stabilising or picking up, to lean against inflation."

However in spite of this inflation data, the long-term prospects for the Australian economy look more pessimistic of late. Consumer spending has reached its lowest point since 2007, as people respond to the global financial crisis by putting wages into their savings accounts.

Looking to the months ahead, this could bring the Australian dollar down again against its rivals.

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