The Australian dollar climbed against all other most-traded currencies today after the nation’s central bank decided to leave interest rates unchanged. Positive macroeconomic data supported the currency as well. The Aussie was rising yesterday too even though Monday’s data was not nearly as good.
The Reserve Bank of Australia decided to keep its main interest rate unchanged at 0.75% at today’s meeting. Such a decision was largely expected by market participants. The central bank retained its easing bias, saying in the statement:
The Board also agreed that due to both global and domestic factors, it was reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.
Some experts noted that the statement sounded a bit more positive than the previous ones. The most positive highlight was the rising housing prices:
There are further signs of a turnaround in established housing markets. This is especially so in Sydney and Melbourne, but prices in some other markets have also increased recently.
The outlook for the global economy also improved slightly:
The outlook for the global economy remains reasonable. While the risks are still tilted to the downside, some of these risks have lessened recently.
The RBA also mentioned that there is a lag in the translation of monetary policy changes to the economy:
Given these effects of lower interest rates and the long and variable lags in the transmission of monetary policy, the Board decided to hold the cash rate steady at this meeting while it continues to monitor developments, including in the labour market.
AUD/USD gained from 0.6818 to 0.6848 as of 11:49 GMT today, reaching the high of 0.6862 intraday. EUR/AUD dropped from 1.6246 to 1.6170, and its daily low was at 1.6147. AUD/JPY rose from the open of 74.29 to 74.54 but retreated from the daily high of 74.84.
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