The decision by the Reserve Bank of Australia (RBA) to leave the cash rate at 1.5%, sent the Aussie dollar above 0.7600 on Monday night.
Citing improving global economic conditions, rising consumer & business confidence, as well as rising commodity and stock prices, the Board of Governors of the RBA said interest rates need to remain low for the current economic recovery to continue.
The RBA also said the declining Aussie dollar has helped the Australian economy recover over the last 4 years.
RBA Governor Philip Lowe said:
“The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.”Since 2013, the Australian dollar (using today’s exchange rate) has depreciated by about 27% against the greenback:
RBA’s decision to leave the cash rate unchanged aligned with analysts’ forecasts, and the reaction in the currency markets was rather subdued. By 11:45 p.m. EST on Monday - 75 minutes after the news - the Australian dollar had climbed to a 5-day high of 0.76300 vs. the USD.
The cash rate announcement also pushed the AUD/USD exchange rate above the important level of 0.7606, which Forex traders have been trading around on multiple occasions over the last three months.
RBA photo by Newtown Grafitti