Will the Australian Dollar, New Zealand Dollar and Rand Exchange Rates Lower on a Russian Interest Rate Hike?

July 27, 2014 - Written by John Cameron

STORY LINK Will the Australian Dollar, New Zealand Dollar and Rand Exchange Rates Lower on a Russian Interest Rate Hike?

Currency News Today - Will the Australian Dollar, New Zealand Dollar and Rand Exchange Rates Lower on a Russian Interest Rate Hike? - Global stock markets had an off-day on Friday and the potential exists that this week will bring another ‘risk-off’ trading session amongst market participants thanks to developments over the past 72hrs.

The apparent shooting down of Malaysia Airlines Flight MH17 by Moscow-backed rebels ten days ago had an instant effect on global appetite for risk and it now appears to be having a secondary effect.

Here's some relevant current GBP forex rates for your reference: (29/07/2014)

The Pound to Australian Dollar exchange rate today is trading 0.09 per cent higher at 1.80649 GBP/AUD.
The Pound to New Zealand Dollar exchange rate is trading 0.4 per cent higher at 1.99438 GBP/NZD.
The Pound to Rand exchange rate is trading up 0.36 per cent 18.00460 GBP/ZAR.

In a surprise move on Friday, the Central Bank of Russia announced that it would be hiking its key interest rate by 50 basis points as of the start of this week.

The move, which the Moscow-based central bank blamed on, ‘a combination of factors, including, inter alia, the aggravation of geopolitical tension and its potential impact on the rouble exchange rate dynamics,’ brings the level of interest rates in Russia to a hefty 8.0%.

The Central Bank of Russia went on to explain that the tightening of policy was aimed at curbing domestic price rises and that, ‘the main reason for inflation acceleration was the effect of the observed rouble depreciation on prices of a wide range of goods and services.’ So, it seems that Russia’s policymakers are laying the blame for escalating domestic prices firmly at the door of the West following the angry response to the MH17 incident by the international community.

The constriction of credit into the global markets which is likely to follow the Central Bank of Russia’ rate hike could accentuate the mini share sell-off of last week across world markets.

Turning to events at home, this week’s session brings the publication of a raft of profit warnings from some of the UK’s leading blue-chip companies.

The Pound Sterling (GBP) has climbed in value by over 10% against a trade-weighted basket of currencies since the turn of the year and the move has hit British companies accruing foreign currency-denominated earnings.

Sharon Bell of Goldman Sachs explained that, ‘they take a hit when they translate their foreign profits made in euros or Dollars back into the relatively strong Pound and they have suffered as growth in the global economy has been slower in the first half of the year than in the UK.’

The strength of the Pound Sterling has already hit profits at large multinationals including GlaxoSmithKline (GSK.L) and Kingfisher (KGF.L) within the past seven days.

This week’s session brings the publication of results from drinks giant Diageo (DGE.L) as well as Rolls-Royce (RR.L) and BAE Systems (BA.L).

A weaker than forecast showing from some or all of these due to the Sterling strength of the past 12 months could add to the prevailing ‘risk-off’ trading environment in the global market.

Such a development could see the South African Rand (currency:ZAR), Australian Dollar (currency:AUD) and the New Zealand Dollar (currency :NZD) exchange rate levels lose further ground in the currency markets.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Australian Dollar Forecasts Daily Currency Updates New Zea Forecasts