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Yen and US dollar Rise after RBA rate decision

Yen and US dollar Rise after RBA rate decision

The Japanese yen and the US dollar rose after the Australian central bank decided to leave its interest rates frozen at their latest meeting.

The decision surprised markets and caused the euro to drop to $1.3890 against the dollar.  The Australian dollar also dipped – the main cause for the euro’s follow-on drop.

The Reserve Bank of Australia (RBA) decided to keep its key interest rates at 3.75 per cent – the market had forecast it to raise the rat to at least 4 per cent.

Traders expect that the yen could rise more depending on a key decision from the White House – Paul Volcker is to make an indication of what he thinks about President Obama’s plans to close down on financial risk-taking.

Mr Volcker, who inspired Mr Obama’s plans, is expected to defend the US administration’s proposals.  Many wonder whether Mr Volcker will have an effect on the market after the widely negative reaction from large banks and investors when Mr Obama first made the announcement to make radical changes.

The main target of Mr Obama, the administration and likely Mr Volcker is the ‘too big to fail’ problem of the largest banks.  They want to change the current system and curb risk-taking – and possibly even break up some of the largest banks.