The Reserve Bank of Australia doesn’t always talk down the Aussie.
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The latest U.S. jobs data was disappointing and decreases the chances of a near-term rise in USA interest rates that would have put downward pressure on the Australian dollar in line with policymaker’s objectives.
The Reserve Bank has left interest rates on hold at its last meeting before the Federal election. The local dollar slipped to 69.25 United States cents from as high as 69.67 U.S. cents yesterday, having surged from 68.28 cents on Friday, after a weaker-than-expected USA labour market report.
The current average home loan nationally is $357,500, down from a high of $386,000 in November 2015, but Finder predicts the average loan size to jump 0.92 per cent in June based on previous movements. And according to CME Group’s Fedwatch, there was only a 26 percent chance of a rate hike in July.
An ensuing rally in US Treasury jolted Australian government bond futures. The 10-year contract was down half a tick to 97.8400, having scaled an all-time peak of 97.8700. It last gained 5.5 ticks to 97.8250. On the other hand, the RBA is confronted with a core inflation reading which is at a record low as well as the lowest wages growth on record.
In his statement, RBA Governor Glenn Stevens said recent data showed overall growth was continuing, despite a large decline in business investment.
But the nature of currency valuations is such that for the big falls forecast for the Aussie – the ones below 70 cents and toward 60 cents – a number of things need to happen.
Official rates will remain at the new record low 1.75 per cent with the May rate cut following eleven months with rates on hold. Mr Stevens said an appreciation in the currency could “complicate” the improvement in the Australian economy.
The market will also be scrutinising remarks from Fed Chair Janet Yellen, who is due to speak on the economic outlook and monetary policy at the World Affairs Council of Philadelphia today at 1630 GMT.
A rate cut, although unlikely, could prompt the AUD/NZD exchange rate to surge higher, as any greater display of dovishness would sharply dent the appeal of the New Zealand Dollar. Against the yen, the dollar reversed its earlier losses and rose 0.2 percent to 107.81 yen, pulling away from the previous session’s low of 106.35, its weakest in a month.
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This report will be the first after last week’s national accounts that showed the economy growing at 3.1 per cent, the fastest pace in over three years.
