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$A rallies on Bank of England stimulus

AAP logoAAP 4/08/2016 Marty Silk

The Australian dollar could hit a one-month high after the Bank of England announced a much stronger stimulus program than expected.

At 0700 AEST on Friday, the local unit was trading at 76.28 US cents, up from 75.94 cents on Thursday.

Westpac senior market strategist Imre Speizer said the BOE's decision to cut rates, add 70 billion pounds worth of quantative easing and introduce a new funding scheme had cause global bond markets to fall.

He said amid those moves the Australian dollar outperformed in the market.

"(The Aussie) retains upward momentum, the next major target 75.75 US cents (the highest level since July 15)," Mr Speizer said in a note.

"The BOE's fresh stimulus will add to the appeal of owning high-yielding Australian dollars."

The main risk event for the currency on Friday in the Reserve Bank's Statement on Monetary Policy, which will include inflation forecasts for the medium term.

CURRENCY SNAPSHOT AT 0700 AEST ON FRIDAY

One Australian dollar buys:

* 76.28 US cents, from 75.94 cents on Thursday

* 77.20 Japanese yen, from 77.10 yen

* 68.54 euro cents, from 68.24 euro cents

* 106.34 NZ cents, from 106.20 NZ cents

* 58.20 British pence, from 57.15 British pence

GOVERNMENT BOND YIELDS AT 0700 AEST ON FRIDAY

* CGS 5.25pct March 2019, 1.433pct, from 1.425pct on Thursday

* CGS 4.25pct April 2026, 1.942pct, unchanged

Sydney Futures Exchange prices:

* September 2016 10-year bond futures contract was at 98.095 (implying a yield of 1.905 per cent), up from 98.040 (1.960 per cent) on Thursday

* September 2016 3-year bond futures contract was at 98.620 (1.380 per cent), up from 98.600 (1.400 per cent).

(*Currency closes taken at 1700 AEST previous local session, bond market closes taken at 1630 AEST previous local session)

Source: IRESS

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