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FOREX FLASH

<strong>Australia raises cost of borrowing</strong><br />AUSTRALIA&rsquo;S central bank yesterday hiked interest rates by 25 basis points to 3.75 per cent, citing strong employment growth, improving business confidence, and solid export demand from Asia. This was a third month in a row that the Reserve Bank of Australia (RBA) has chosen to raise rates. The central bank will next meet at the beginning of February.<br /><br /><strong>BoJ&rsquo;s actions may not stem yen&rsquo;s rise</strong><br />Bank of Tokyo currency economist Lee Hardman yesterday argued that the Bank of Japan&rsquo;s decision to offer commercial lenders short-term loans may not be enough to stem the yen&rsquo;s gains. Following an emergency meeting, the central bank announced yesterday that it will set aside $10 trillion yen ($115bn) to provide three-month loans at 0.1 per cent. Japanese national strategy minister Naoto Kan said he expects it to slow the yen's rise.<br /><br /><strong>Real strength continues for Brazil</strong><br />Brazil&rsquo;s currency, the real, continued to march higher yesterday, fuelled by the fastest pace of manufacturing growth in China in five years and further rises in global equity markets. The real has gained 34 per cent against the US dollar this year, but a positive outlook for the domestic economy and relatively high interest rates have attracted investors to the country&rsquo;s assets and currency. This is in spite of the introduction of capital controls to curb investors&rsquo; enthusiasm.<br /><br /><strong>Poor UK data caps sterling gains</strong><br />UK manufacturing growth was weaker than expected in November according to the latest purchasing managers&rsquo; index, published yesterday. The pound slipped to $1.6503 from a session high of $1.6542 just before the data&rsquo;s release. The weaker data capped sterling&rsquo;s gains against the greenback.<br /><br /><strong>Risk appetite boosts Canada&rsquo;s Loonie</strong><br />The Canadian dollar yesterday rose against the greenback as the price of oil and gold rose and investors regained their appetite for risk as worries over Dubai&rsquo;s debt problems faded. But Canadian Finance Minister Jim Flaherty said that Canada is unlikely to have to take special measures to curb the rise of the Canadian dollar.