By Josie Cox
The Australian dollar strengthened sharply against the U.S.
dollar on Tuesday, just seconds before Australia's central bank
surprised some investors by holding rates steady.
The action in currency markets just ahead of the announcement
prompted head scratching among some market watchers. In a note,
traders at Citigroup said the move, which correctly anticipated the
direction of the Australian dollar, raised "a few questions about
the possibility of a data leak."
A representative with the Reserve Bank of Australia wasn't
immediately available for comment. A spokeswoman for the Australian
Securities and Investment Commission said: "We cannot comment
specifically, however as you may expect we would review any unusual
trading as part of our routine monitoring and surveillance
activities."
In May of 2014, an employee of Australia's government statistics
office and an employee at one of the country's biggest banks were
arrested in a case alleging insider trading that used leaked
government data.
The data is held under a strict embargo and released to
financial markets at the same time each month. Authorities allege
in the 2014 case that the bank employee used the leaked numbers to
trade foreign-exchange derivatives--generating a profit of about 7
million Australian dollars (US$6.6 million).
Many investors and traders had expected the RBA to cut its
benchmark interest rate from a record low 2.25%. Falling rates tend
to make a currency relatively less attractive to hold. The central
bank kept rates unchanged, citing concerns about frothy housing
prices.
The absence of a rate cut forced traders to cover bearish bets,
causing the Australian dollar, also known as the Aussie, to
rally.
The Aussie rose from around US$0.777 to around $0.782 in the
minute before the official announcement. It later pared gains and
recently traded at US$0.78.
Write to Josie Cox at josie.cox@wsj.com
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