Aligned to expectations, the Reserve Bank of Australia left interest rates on hold yesterday at a record low of 1.5 percent. With supporting commentary offering up very little new insight, policy makers re-confirmed the view that any shift towards tighter monetary settings would be gradual, allowing instead labour markets and inflation to return to target.
Whilst the overall impact on the Australian dollar was initially limited in the aftermath, the domestic unit plummeted during overnight trade, hitting fresh lows for the year versus the world’s reserve currency. Having earlier traded to a 24 hour high of 0.7546, resistance at the 75 US Cents level was comfortably broken down with the Aussie eventually settling at levels closer to the 0.7490 mark, a rate in line with this morning’s open.
In what’s been a period dominated by strong demand for the US dollar, investors have continued to line up during the early parts of this week amid comments in particular from the Trump administration which triggered renewed hope that the North American Free Trade Agreement could be renegotiated. Opening in a vulnerable position, the Australian dollar is weaker versus the Kiwi (1.0688), flat versus the Sterling (0.5496).