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Australian Dollar Rises to Four-Week High

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Australian dollar climbed to a four week high after the Reserve Bank of Australia left the benchmark rate unchanged on Tuesday.

Last month, the central bank ended a one year policy pause and lowered its benchmark rate to an all-time low in an effort to stimulate growth after CPI report showed inflation slumped by 0.2 percent in the first quarter. Since the monetary policy adjustment, Australian economic data has been better than analysts forecast.

The GDP shows the economy expanded at the fastest pace in four years in the last quarter and the unemployment rate remains at 2 1/2 year low in April.

“Expectations for any early additional easing receded and supported the Aussie,” said Takuya Kanda, a senior researcher at Gaitame.com Research Institute Ltd. in Tokyo. “The next move will still be easing, but it won’t be anytime soon. Aussie shorts were accumulating, so these positions were unwound and pushed the currency higher.”

RBA governor Glenn Stevens has said the economy is improving according to the central bank forecast, and further buttressing case for stronger economy is the apex bank’s data showing business lending rose at the fastest pace in seven years, with demand for corporate loans also increasing to its highest since mid-2015, indicate improved business conditions.

The Australian dollar gained 1 percent to 73.36 U.S. cents as at 7:22 a.m. in London, the highest since May 6. The Aussie 10-year bond yield rose five basis points to 2.21 percent.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.