RBA Not Too Worried About The A$ – AUD/USD Bounces


The Reserve Bank of Australia left the interest rate unchanged at 2%, as widely expected. What stands out is that the RBA sees the rise of the currency as at least partially reflecting the higher commodity prices. In general, a further appreciation would “complicate” things, but they certainly do not see worried at the moment.

AUD/USD, which gradually lost ground towards the release, is on the rise, bouncing back above 0.76.

On inflation, the team led by Glenn Stevens sees the low inflation as providing scope for further easier policy. At 2%, the level of the interest rate is at historic lows for the land down under, but it remains high in comparison to quite a few developed economies. Inflation is expected to remain low in the next year or two according to the RBA.

On growth, they see growth continuing in the horizon. The prospects are “reasonable” according to central bank. All in all, the statement mostly repeats the previous statements, seeing stability for the time being.

Given the recent strength of the Australian dollar, there were expectations for a higher level of complaints on the appreciation of the A$. Without such jawboning, the Aussie has room to the upside.

Earlier, Australia reported a trade deficit of 3.41 billion, more than around 2.5 billion expected. The AiG services PMI dropped to 49.5, worse than 51.8 expected. In addition, a survey shows Australian businesses are the most pessimistic in two years.

Here is how the recent moves look on the 30 minute chart:

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