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Investors Take Profit on Aussie as RBA Decision Looms

H.S. Borji
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Investors Take Profit on Aussie as RBA Decision Looms

The Australian dollar drifted lower Monday, before rebounding in the North American session, as the forex market shifted its attention to the Reserve Bank of Australia.

Australia’s central bank is expected to keep its benchmark lending rate unchanged at 2.5 percent, according to a broad consensus of market analysts. The RBA, which is scheduled to meet Tuesday, has shifted its monetary stance to neutral amid expectations the Chinese government could launch stimulus measures if growth continues to wane.

The Australian dollar soared last week, hitting a four-month high against the greenback. The Aussie was supported by an improving New Zealand economy, as well as Japan’s ninth consecutive month of inflation gains. A stronger local economy also helped propel the Aussie higher at the end of the week. These developments could keep the Australian dollar elevated, as the forex market continues to speculate about the currency’s high point.

The AUDUSD pair traded at a daily low of 0.9220, before rebounding to 0.9262, a gain of more than 0.1 percent. The pair is up more than 4 percent year-to-date, driven largely by last month’s surge.

While the RBA meeting could limit the Aussie’s gains momentarily, traders know over the short-term there isn’t much to stop it. With annual consumer inflation at 2.7 percent, the RBA is unlikely to push for a lower currency, at least not until it can confirm whether the pick-up in consumer prices is temporary or not. Additionally, the RBA appears to be more optimistic about the economy, as recent employment and building approval data show recovery could be gaining momentum.

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