Dollar lower following RBA rally

Piggy bank, savings, money, hammerThe Australian dollar is lower after briefly hitting a one week high on the back of the Reserve Bank’s decision to keep the cash rate unchanged.

At 0700 AEST on Wednesday, the local unit was trading at 76.35 US cents, down from 76.93 cents on Tuesday.

On Tuesday afternoon, it peaked at 77.12 US cents after the RBA meeting but started to lose ground in the overnight session because the central bank made it clear it was still inclined to cut the rate in the coming months.

“Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth,” RBA governor Glenn Stevens said.

BK Asset Management MD, Kathy Lien, said the Australian dollar out performed the US dollar on Tuesday but the rally was brief.

“The market had priced in an 80 per cent chance of a rate cut and despite plunging iron ore prices, a number of weaker economic reports along with slower growth in China, the central bank felt that it was too soon to pull the trigger,” she said.

“The next rate cut will probably be in May.”

Lien said another reason for the Australian dollar’s overnight fall was the greenback’s rebound from losses at the end of the last week on the back of a disappointing jobs report.

“As we indicated after the payrolls report, the monthly number can be volatile,” she said.

“What is important is the general trend of job growth, the unemployment rate and earnings.”

 

AAP

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