RBA holds rates but desires weaker Aussie

The Australian dollar rallied after the Reserve Bank of Australia left the overnight cash rate at 2 per cent on Tuesday. The decision came after two, quarter-point cuts this year. Although it was widely expected by the markets, the aussie jumped more than half a US cent right after the news, to US76.85¢ and then continued higher.

The RBA cut the cash rate to 2 per cent in May, after having reduced it to 2.25 per cent in February. The RBA statement after the rate announcement signaled that a rate cut is not in the picture in the near future. RBA Governor Glenn Stevens said the bank would await further data before assessing whether or not current policy settings would “most effectively foster sustainable growth and inflation consistent with the target”.

One important reference to the strength of the Australian dollar was made by the RBA Chief. He said the currency still has some way to fall and that “a further depreciation seems both likely and necessary particularly given the significant declines in key commodity prices”.

“The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies,” Mr Stevens said.

The post RBA holds rates but desires weaker Aussie appeared first on Forex Circles.

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