Shares of Commonwealth Bank of Australia (ASX: CBA) have surged to a record high today based on heightened expectations for further interest rate cuts by the Reserve Bank. The stock climbed as much as 1.4% to a new high of $94.66, surpassing its previous high of $93.96 achieved on 6 February this year.
So What: Early this morning, the US Federal Reserve hinted further as to when interest rates may be increased. It cited lower than expected inflation, whilst also downgrading its view of economic activity. With US interest rates now set to rise slower than previously expected, the US greenback weakened which saw the Australian dollar climb back above US78 cents – away from the Reserve Bank of Australia's target rate of US75 cents.
The RBA is partly relying on US interest rate hikes to force the Australian dollar lower without having to intervene by cutting interest rates itself. With the local currency now climbing however, there is more pressure for the RBA to cut interest rates at least once in the near future.
As a result, investors are frantically adjusting their portfolios toward high-yield dividend stocks to offset the impact of lower interest rates on their wealth. Westpac Banking Corp (ASX: WBC) jumped 1.5%, while Australia and New Zealand Banking Group (ASX: ANZ) and Telstra Corporation Ltd (ASX: TLS) also rose 1.2% each.
