The Australian dollar fell against its US peer and the euro ahead of the monetary policy announcement of the Reserve Bank of Australia and maintained losses afterwards. The currency rallied to the highest level in a year and a half versus the Japanese yen but retreated as of now.
The RBA kept its key interest rate unchanged at 2.5 percent today. While the central bank noted “improving business conditions and some recovery in household sentiment”, it also mentioned decline in resource sector investment and an increase of the unemployment rate. Policy makers also continue to worry about the strength of the Aussie, saying:
The exchange rate, on the other hand, remains above most estimates of its fundamental value, particularly given the declines in key commodity prices. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.
As a result of all these factors, the RBA reiterated its outlook for unchanged monetary policy in the near the future:
On present indications, the most prudent course is likely to be a period of stability in interest rates.
AUD/USD dropped from 0.9331 to 0.9296 as of 5:20 GMT today. EUR/AUD advanced from 1.4067 to 1.4111. AUD/JPY rose from 97.37 to 97.59, the highest rate since May 31, but retreated to 97.45 later.
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