Aussie Declines Following RBA Minutes
The Australian dollar weakened against its US counterpart Tuesday after the minutes from the Reserve Bank of Australia’s latest policy meetings revealed concerns about the recovery efforts and reaffirmed interest rates are likely to remain low for some time.
The AUDUSD declined 0.68 percent to 0.9336, its lowest level in a week. The trend line shows initial support now at 0.9332. Initial resistance is likely found at 0.9424. The pair is trading right around the 20-day moving average (0.9338).
The Aussie fell to a fresh three-week low against the New Zealand dollar, with the AUDNZD declining 0.35 percent to 1.0793. The pair is currently testing initial support at 1.0791. Resistance is likely found at 1.0855.
The Aussie reached a one-week low against the euro, with the EURAUD advancing nearly half a percent to 1.4506. The pair is supported at 1.4392. Key resistance is at 1.4511.
The RBA revealed very little new information at the June 3 policy meeting, reaffirming the central bank’s wait-and-see approach to policy. The nine-member Reserve Bank Board said it expects growth to below trend over the next year, as the economy continues to recover from a slowdown in mining investment.
“Notwithstanding a pick-up in growth around the turn of 2014, GDP growth was expected to be below trend over the next year or so, rising gradually thereafter,” the minutes of the June 3 meetings said. “Inflation was forecast to remain within the target. Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the Board judged that the current accommodative stance of policy was likely to be appropriate for some time yet.”
The RBA also noted that “the exchange rate remained high by historical standards, particularly given the further decline in commodity prices over the past month.”
The Board decided to leave the overnight rate unchanged at 2.5 percent.
In economic data, new motor vehicle sales in Australia advanced 0.3 percent in May, the Australian Bureau of Statistics reported today. Year-on-year, new motor vehicle sales were down 2 percent.
Westpac will release Australia’s leading index of economic activity Wednesday.
The RBA will publish its monthly bulletin Thursday.
The Australian dollar is expected to strengthen in the coming months before falling back to pre-2008 levels by the end of the year, according to a recent survey of 17 forex professionals conducted by the Australian Associated Press.
The Aussie is expected to fall to 0.88 US by the end of 2014, as US rate-hike expectations weigh on the Australian dollar.
The US Federal Reserve is expected to pare back asset purchasing by another $10 billion Wednesday when it releases its official rate statement and economic projections. The Fed is expected to raise interest rates by the second quarter of 2015.
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