The Australian dollar surged yesterday and maintained its gains today as the nation’s central bank refrained from an interest rate cut and signaled that it is going to keep borrowing costs stable. Furthermore, the bank dropped the mention of a strong exchange rate, meaning that it is not going to take steps for weakening the currency.
The Reserve Bank of Australia maintained its main interest rate at 2.5 percent at yesterday’s monetary policy meeting. The central bank was rather dovish in its statement, but said that “inflation in the December quarter was higher than expected”. The RBA did not mention that the Aussie’s exchange rate is “uncomfortably high” as in the previous statements, noting instead:
The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.
As for the future, the bank stated:
On present indications, the most prudent course is likely to be a period of stability in interest rates.
The RBA effectively ruled out an interest rate cut and this is very positive for the Australian currency.
AUD/USD soared from 0.8750 to 0.8923 yesterday and traded at 0.8907 as of 00:48 GMT today. EUR/AUD traded at about 1.5172 at today’s trading session following the drop from 1.5450 to 1.5144 on yesterday’s session. AUD/JPY jumped from 88.35 to 90.69 before trading at 90.43 on the current session.
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