Australian dollar rallies to 6-month high as analysts demand RBA rate cut

AUD/USD has risen to a 6 ½- month high of 0.7445 on Friday, making a more than 4% jump on the week.

The Australian dollar has emerged the biggest gainer among major currencies this week helped by the positive surprise in the GDP data but analysts have warned that too much of appreciation in the Aussie may warrant a rate cut by the Reserve Bank of Australia.

AUD/USD has risen to a 6 ½- month high of 0.7445 on Friday, making a more than 4% jump on the week.

A Finviz analysis showed the Aussie standing top on the weekly performance chart followed by the New Zealand dollar with 2.8% and UK's pound which is up 2.3%.

The Australian economy grew 3% year on year in the fourth quarter data showed on 2 March, up from 2.7% in the third quarter and against consensus of a slowing down to 2.6%.

The services sector has fared well in February as per the AiG index which rose to 51.8 from January's 48.4. A number below 50 shows contraction.

The RBA had left its official cash rate at 2% at the 1 March policy review citing downside risks to manufacturing and mining sectors while also noting that the policy is currently accommodative enough.

Still, the central bank is ready to lower rates further if growth needs additional boost, the governor Glenn Stevens said.

"Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand," Stevens said in the policy statement released on Tuesday.

Now with the dollar rising faster, analysts expect the central bank has to act immediately so that the Australian exporters will face tougher time with the local currency fetching fewer foreign currencies.

Technically, the Aussie dollar has broken a key resistance barrier – the 50-period moving average on the weekly chart - increasing the likelihood of levels like 0.7600 in the coming weeks. Given the steepness of the uptrend this year, the pair has all chance to break through the 0.7550 resistance.

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