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Nothing to stop the Australian dollar
Published on 02.08.2017 11:58

The Australian dollar is failing to find a direction today after yesterday’s loses on the back of a speech from the Reserve Bank of Australia but some say this is temporary and the bull trend is set to continue.

At 9.40am(GMT) the Aussie dollar was trading at US79.65c virtually unchanged from yesterday’s close.

As expected yesterday, no changes were made in the RBA’s latest interest rate decision so all eyes were on the following monetary policy statement from RBA Governor Philip Lowe.

Mr Lowe tried to talk down the Australian dollar by noting that the sudden rapid appreciation will do more harm than good to the Australian economy in a number of areas including inflation and the jobs market.

“The Australian dollar has appreciated recently, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast” Lowe said in a monetary speech.

Although the Australian dollar retreated after the speech, it largely brushed off the comments from the RBA governor and some say it will take more action such as the threat of an interest rate cut to stop the Aussie dollar’s rise towards US85c.

If it does head towards this number, the RBA is expected to come out fighting and “jawbone” the currency,

"It was a quite a neutral statement, If the Australian dollar pushes up toward US85 cents, then that would get the RBA more concerned." said Nader Naeimi from AMP Capital.


Andrew Masters

Analyst

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