Australian Dollar Declines Against Major Peers After US Fed Decision

The Australian dollar declined against most of its major peers on Friday as investors weighed the effect of the higher interest rates in the United States following an update to monetary policy from the Federal Reserve on Wednesday.

The US Federal Reserve took a widely expected move to raise its benchmark interest rate by 0.25% to 0.50% to 0.75%. The central bank also pointed to a possibility of accelerating its pace of raising interest rates in 2017 to three hikes, instead of a previous forecast of two times in its September’s meeting.

The Federal Reserve said that the economy has to remain stable enough for these hikes to actualize. Recent economic data releases in the United States revealed a steady economic growth, which supported investors’ confidence that the Federal Reserve will follow through with its plans to push rates higher.

Fed futures prices, which are used by investors to take bets on future US interest rates, showed a 50.4% chance of an interest rate hike when the Federal Open Market Committee meets on June 14, according to the CME Group FedWatch tool.

The Australian dollar was further weighed down by China’s Central Economic Work Conference. The meeting, which happens annually and gathers main government officials, decides the course of economic plans and policy for the coming year. After concluding the meeting today, Chinese leaders said that the nation’s monetary policy will be kept neutral in 2017.

AUD/USD traded at 0.7296 at 20:40 GMT on Friday, after touching 0.7269 at 15:50 GMT, the pair’s lowest level since June. AUD/USD opened trading today at 0.7361.

If you have any questions, comments or opinions regarding the Australian Dollar,
feel free to post them using the commentary form below.

Leave a Reply

Your email address will not be published. Required fields are marked *