Australian Dollar Retreats After RBA Rate Decision
07 July 2015 - 4:33PM
RTTF2
The Australian dollar retreated from its recent highs against
the other major currencies in the Asian session on Tuesday, after
the Reserve Bank of Australia maintained its key interest rate at a
record low, as widely expected by economists, but signaled a
further rate cut this year.
The policy board governed by Glenn Stevens decided to leave the
cash rate at 2.00 percent. The bank lowered the rates by 25 basis
points each in February and May.
The board judged that leaving the cash rate unchanged was
appropriate at this meeting.
"Information on economic and financial conditions to be received
over the period ahead will inform the Board's assessment of the
outlook and hence whether the current stance of policy will most
effectively foster sustainable growth and inflation consistent with
the target," the bank said in a statement.
Policymakers observed that the Australian dollar has declined
noticeably against a rising US dollar over the past year. Further
depreciation seems both likely and necessary, particularly given
the significant declines in key commodity prices, the bank
said.
The bank also noted that "monetary policy needs to be
accommodative" as growth remains at rate below longer-term
average.
The 'no' vote handed out by the Greeks in Sunday's referendum
has added to recent concerns about Greece defaulting and exiting
the eurozone.
Greece's often outspoken finance minister Yanis Varoufakis was
replaced in a move that could help jump-start bailout talks between
Greece and its European partners.
The markets now await the Euro Summit, due later in the day,
convened by the European Council President Donald Tusk to discuss
the situation after the referendum in Greece.
In other economic news, data from the Australian Industry Group
showed that the construction sector in Australia moved further into
contraction territory in June, with a Performance of Construction
Index score of 46.4, down from 47.8 in May.
Monday, the Australian dollar showed mixed trading against its
major rivals. While the Australian dollar fell against the U.S.
dollar, the yen, the NZ dollar and the Canadian dollar, it held
steady against the euro.
In the Asian trading today, the Australian dollar fell to an
8-day low of 1.1180 against the NZ dollar, from an early 4-day high
of 1.0704. The aussie may test support near the 1.06 region.
Against the U.S. and the Canadian dollar, the aussie dropped to
0.7464 and 0.9447 from early highs of 0.7490 and 0.9478,
respectively. If the aussie extends its downtrend, it is likely to
find support around 0.72 against the greenback and 0.92 against the
loonie.
Pulling away from early highs of 91.84 against the yen and
1.4727 against the euro, the aussie edged down to 91.54 and 1.4777,
respectively. On the downside, 90.00 against the yen and 1.49
against the euro are seen as the next support level for the
aussie.
Looking ahead, U.K. industrial production for May is also due to
be announced in the European session.
At 3:00 am ET, Bank of France Governor Christian Noyer is due to
speak about EU capital markets union at a financial sector
conference in Paris.
In the New York session, Canada and U.S. trade balance, both for
May and U.K. NIESR GDP estimate for June are scheduled to be
released.
Eurozone finance ministers are due to meet to discuss Greece
later in the day.
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