The Australian dollar dropped significantly against the US dollar after the release of the minutes of Reserve Bank of Australia, which hinted at a dovish outlook. The RBA minutes indicated that the bank was worried about Australia’s weak labor market as evidenced by high unemployment rates and the increasing risks in the housing market.
The AUD/USD had lost over 50 points at the time of writing as the selling pressure on the Aussie stabilised. There was subdued price action around the US dollar as tracked by the US Dollar Index, which was trading at 100.05, much lower than its opening price of 100.34.
The Australian dollar was largely weakened by the cautious tone expressed by the Reserve Bank of Australia in RBA minutes. The minutes noted that the unemployment rate had risen to 5.9% in February and that indicators used to track wages were showing weak wage growth in the labor market. The minutes also indicated that housing credit rates were higher than household incomes, which is a sign of rising risks in the housing market.
The risk-averse market sentiment also contributed to the higher selling pressure on the Aussie as investors sold high-risk currencies and bought low-risk currencies such as the Japanese yen.
The currency pair is likely to gain renewed impetus during the North American session due to the release of industrial production and housing market data from the US docket.
The AUD/USD was trading at 0.7543 as at 11:13 GMT having opened the day’s session trading at a high of 0.7595. The AUD/JPY was trading at 82.19, which is much lower than its opening price of 82.94.
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