Aussie Dollar Drops on Monetary Policy Change

The Australian dollar has been one of the best performers in currency markets during the past few months as it was the first country to raise interest rates among the wealthy nations, today the sentiment towards the Aussie changed after surprising statements from the country’s financial authorities.
The Aussie fell today versus virtually all of the 16 main traded currencies after the Reserve Bank of Australia Deputy Chairman of the Board Ric Battellino affirmed that the country’s borrowing costs are now back to a “normal range”, suggesting that a further interest rate hike is not likely to follow for the next policy makers meeting, which decreased optimism for the Australian dollar outlook as traders are likely to purchase higher-yielding options overseas. The European Central Bank and the Federal Reserve also took a dovish tone today reiterating that interest rates will remain at a record low for an extended period.
The appeal for the Australian currency declined significantly today as the interest rate outlook was the main responsible for the Aussie’s rally during the past few months, and a halt in rate hikes is likely to force the currency down as it can be considered as overpriced by a number of analysts.
AUD/USD traded at 0.8999 as of 14:43 GMT from a previous rate of 0.9065 yesterday. AUD/JPY traded 80.74 from 81.51.

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