So a rise in US interest rates (or an appreciation of the US dollar) would increase interest costs for Australian banks that extend loans to Australian borrowers. However, it is standard practice for Australian banks to eliminate, or at least substantially reduce, these risks. They can do this using a derivative instrument known as a cross-currency basis swap.
I am cautiously optimistic and expect that the economic recovery in the euro area will pick up momentum in the course of 2005. The somewhat lower GDP growth projected in 2005 by ECB staff compared to earlier projections mainly reflects the carry-over effect of weaker economic developments in 2004 rather than a downward revision of the expected pick-up of activity this year.