The Australian dollar dropped today after the Reserve Bank of Australia released the minutes of its last policy meeting. The central bank was more dovish than it looked previously and hinted that further interest rate cuts are not impossible.
The RBA was more dovish than Forex market participants have thought. The central bank predicted that economic growth will be at 2.5 percent till mid-2014, before accelerating thereafter, down from the previous estimate of 3 percent. The minutes said:
Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further.
Such wording was very surprising as the bank did not mention possibility of further cuts in the statement. Additionally, the RBA said that “the course of the exchange rate would be important”, leading to speculations that the central bank wants the currency to fall even more.
AUD/USD fell from 0.9107 to 0.9072 as of 12:12 GMT today, while its daily low was at 0.9026. AUD/JPY declined from 88.83 to 87.57 before trading at 88.17. EUR/AUD went up from 1.4634 to 1.4754.
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