Australian dollar down on dovish RBA

Financial and commodity markets analytics

The Australian dollar is sharply lower in early trade today after a change in tone by the Reserve Bank of Australia in regards to the level of the Australian dollar.

At 8.38am (GMT) the Aussie dollar was trading at US 75.68c down 0.51 percent from yesterday’s trading.

As widely expected the Reserve Bank decided to keep rates on hold this morning at a record low 2 percent but the following monetary statement was a lot stronger than last time around.

In an about turn from last month, the RBA noted that the recent strength of the Australian dollar which jumped from a low of almost US68c to a recent high of over US77c could hamper recovery in the local economy as it transitions away from the mining boom.

“The Australian dollar has appreciated somewhat recently. In part, this reflects some increase in commodity prices, but monetary developments elsewhere in the world have also played a role,” the statement noted

“Under present circumstances, an appreciating exchange rate could complicate the adjustment under way in the economy.”

The central bank also noted that persistently low inflation remains a problem and they are ready to act if the situation remains unchanged,

“Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand,” the RBA said.


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