Australian dollar charges back

The Australian dollar is recovering rapidly after hitting its lowest points in more than a year.

Australian dollar fell to a low of US 93.88 cents during offshore session, after the Reserve Bank of Australia hinted yesterday that it was open to an interest rate cut if inflation pressures ease. However by early this morning, the currency was at US 95.75c.

According to Mike Burrowes, Bank of New Zealand currency strategist, the Australian dollar is charging back on learning of a European banking recapitalisation plan.

“That’s been on a story around about European leaders understanding the urgency to act,” he said. “In particular, they need to undertake steps to bolster the European banking system.”

The details of the plan are being discussed. However, European Union ministers who are meeting in Luxembourg said they had not done enough to convince financial markets that Europe’s banks could withstand the debt crisis.

“It’s a move away from worrying about the sovereigns to trying to put more capital back into the banking system,” Mr Burrowes said.

“It allays concerns that those banks could run into trouble if we saw Greece default.”