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ASIC launches investigation into suspect Australian dollar trading ahead of interest rate announcements

The integrity of the local foreign exchange market has been called into question after the corporate regulator launched an investigation into suspect trading in the Australian dollar.

Last month and again on Tuesday, traders appear to have correctly guessed surprise decisions on interest rate movements by the Reserve Bank in the minute immediately prior to the official release.

On both occasions the Australian dollar moved sharply just seconds before the Reserve Bank announcement.

But the trading on Tuesday was particularly noticeable and most seasoned traders smelled a rat.

Just 45 seconds before the Reserve Bank released its decision to keep rates on hold — which caught markets off-guard — an unidentified trader put through a buy order for Australian dollars that booted the currency more than 25 basis points higher.

That pre-empted a surge in the local currency as traders, having already priced in an interest rate cut, scrambled to unwind their positions.

Last month the opposite trade occurred in the seconds leading up to a surprise rate cut.

On global foreign exchange markets, seconds can mean millions of dollars and even tiny fluctuations can deliver windfall gains.

Treasurer Joe Hockey spoke about the trades to Reserve Bank Governor Glenn Stevens this morning, who assured Mr Hockey the statement was "published exactly at 2.30pm and according to procedures".

"He advised me that he'd spoken to ASIC about the matter," Mr Hockey said.

"I'm satisfied that that investigation will be properly undertaken.

"Obviously I was, like he was, concerned about reports that there had been extraordinary trades before the release of the Reserve Bank decision yesterday."

Getting to the bottom of the suspect trades, however, will be no easy task.

Unlike stock markets, currencies are not traded through a central exchange but through highly sophisticated trading platforms around the globe.

Even then, it is possible no skulduggery was involved.

Some traders warn that the sharp movements may have been amplified by the fact that trading volumes in the lead-up to the decisions was extremely thin.