Aussie dollar trading above US$0.65

Daily Currency Update

The Australian dollar is slightly stronger this morning when valued against the Greenback currently trading at 0.6520 at time of writing. The AUD/USD pair recovers more than half of its intraday losses and rebounds above 0.65 US cents. On the data front flash JUDO Bank Composite PMI surprisingly contracted in November. The index showing overall private business activity declined to 49.4 from 50.2 in October due to weakness in the services sector. A figure below the 50.0 threshold is considered as contraction in economic activities. Australia's central bank has found no evidence that monetary policy is more potent in the country than elsewhere given households have ways to manage interest rate risks, even though they have more debt exposed to variable rates. The RBA has held rates steady for a year, judging the current cash rate of 4.35% - up from the 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains. The peak rate of 4.35% is lower than in many other economies in part because the RBA reckoned borrowers would be feeling the rate pain more quickly than elsewhere given the prominence of variable-rate mortgages. Looking ahead this week and on Wednesday Australian Bureau of Statistics will release the latest Consumer Price Index (CPI) figures which is expected to rise from the month from 2.1% to 2.5%.