The RBA left interest rates on hold Tuesday, citing an absence of immediate inflation risks and pointing to the high Australian dollar as a headwind for the economy. The cash shop online 2011 rate has been left at 4.75% since November, with most economists expecting it to remain sidelined until the second half of the year. At 0325 GMT, the Australian dollar was changing hands at US$1.0465.Despite growing calls that the Australian dollar is over valued, there appears to be little holding it back, with a test of US$1.0500 now the next psychological test, said traders. In mid-March, the Australian dollar was languishing around US$0.9700 as the nuclear emergency in Japan sapped risk appetite globally. It has since rebounded sharply. "I think that there is little obvious resistance holding the Australian dollar back in the short term," said Greg Gibbs, head of currency strategy at Royal Bank of Scotland Group PLC. As monetary conditions tighten and the Australian dollar climbs the economy is holding up, added Gibbs. "Overall it can cope," with a push toward US$1.1000 not out of the question, he said. "It's pretty clear that the labor market is tightening up. The data are the most reliable signal of the underlying trend in the economy," said Paul Bloxham, chief economist at HSBC Holdings PLC. The RBA is on track to raise interest rates by July or August, with a fall in unemployment below 5% a key requirement for that to happen, Bloxham said. It now needs to see clearer evidence of inflation with first quarter data due out at the end of April, he added. Still, the Australian dollar is likely to be a key coach outlet store factor in the timing of the next increase in interest rates. "The exchange rate is a big player out there. The more it holds up, the more it does the work of the RBA," Bloxham added.
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