Australian Dollar Advances as RBA Minutes Less Dovish Than Expected

The Australian dollar rose today, reversing yesterday’s fall, as the minutes of the Reserve Bank of Australia’s monetary policy meeting weren’t as dovish as analysts expected, considering the decision to lower the interest rates.
The RBA lowered its main cash rate by 25 basis points to 4.25 percent on December 6, following the reduction in November. The minutes explained the intensifying concerns about the situation in Europe as the main reason for the monetary easing.
The minutes weren’t as pessimistic, though, as one might expect after the second decrease of the borrowing costs in a row. The central bank said that the situation in other parts of the world wasn’t as bad as in Europe. The economic growth in the United States picked up momentum and the economies of the Asian nations remained robust, even though they were expanding at slower rate. The mining sector benefited from the strong investment growth, but other sectors of the nation’s economy weren’t far behind.
The Reserve Bank concluded:

On the one hand, there had been further evidence that a major investment boom was in progress and the overall economy was expanding at a pace broadly in line with trend. Australia’s main trading partners were also still recording solid growth. This did not suggest any strong need to cut interest rates. Against this, developments in Europe continued to pose downside risks to the global economy and, consequently, also to Australia. These risks had, if anything, increased though the timing and magnitude of any effects that might flow from them remained very difficult to predict.

AUD/USD advanced from 0.9895 to 0.9934 and AUD/JPY went up from 77.22 to 77.46 as of 5:22 GMT today. EUR/AUD dropped from 1.3133 to 1.3087.

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