Australian dollar tumbles

Financial and commodity markets analytics

The Australian dollar took a hit today after one of Australia’s leading banks followed in the footsteps of Westpac bank, cutting rates on home loans and adding more pressure on the RBA to cut interest rates.

The commonwealth Bank of Australia, Australia’s biggest home loan provider, increased the interest rate they charge to borrowers by 15 basis point, and although not as big as Westpac’s 20 point increase, it was enough to frighten investors and have them dump the Aussie dollar.

It now means that over half of Australian mortgage holders are paying more for their home loans which could even turn into a political question as the scenario plays out.

The reserve bank of Australia is in a tight corner as any increase in interest rates is likely to further inflame an already over heated property market, while a lack of action may see the country slide into recession.

One of the biggest reasons the Aussie dollar has held its ground is because of the attractive interest rate in comparison to other countries, but with a 60% chance of the RBA cutting interest rates next month we expect the Aussie dollar to remain under pressure and eventually drift down towards the US70c level.


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