Australian Dollar (AUD) Exchange Rate Posts Widespread Declines after RBA Comments
On Tuesday the ‘Aussie’ slid against the majority of its currency counterparts as investors reacted the the Reserve Bank of Australia’s comparatively dovish meeting minutes.
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The central bank took pains to assure markets that interest rates would be on hold for some time to come.
Interest rates are currently at record lows.
The minutes stressed that the spare capacity in Australia’s labour market would persist, commenting that a ‘sustained increase in dwelling investment was in prospect, consumption had strengthened a little and business conditions were around average levels.
‘With growth in activity expected to pick up only gradually, and spare capacity in the labour market consequently remaining for some time, growth in domestic costs was forecast to remain contained.’
The Reserve Bank of New Zealand is currently in the process of hiking interest rates and the Bank of England looks set to follow suit next year.
The disparity between the stances adopted by these institutions and the RBA is weighing on the Australian Dollar.
Further ‘Aussie’ declines occurred as ratings agency Standard & Poor’s hinted that Australia’s budget deficit could see the nation’s credit score downgraded from AAA.
During Australasian trading a domestic conference board leading index showed stagnation in March.
February’s gain was negatively revised to 0.2 per cent.
A risk-off environment also lingered on Tuesday, limiting the appeal of assets like the Australian Dollar.
Tensions in Ukraine and Vietnam were joined by unrest in Thailand as the nation’s army imposed martial law in its most direct political move for 12 years.
Movement in the AUD/GBP pairing occurred following the release of UK inflation figures and the ‘Aussie’ held declines against the Euro even as European Central Bank stimulus speculation mounted.
During Australasian trading further Australian Dollar movement may be a result of the release of the domestic Westpac Consumer Confidence index for May.
If the index declines from the 99.7 level recorded in April the ‘Aussie’ could fall further.
In other currency news, the US Dollar was trading in a narrow range ahead of the publication of Federal Open Market Committee meeting minutes. The Yen approached a three-month high against the ‘Greenback’ as investors favoured the safe-haven asset and the Pound broadly strengthened in response to slightly better-than-forecast inflation data.
The Indian Rupee snapped four days of gains as investors bet that the rally in the emerging market asset had been overdone.
Tomorrow the main causes of currency market movement are likely to be the release of the Bank of England’s meeting minutes, consumer confidence data for the Eurozone and the publication of FOMC minutes.