The Australian dollar tumbled as the Reserve Bank of Australia revised its growth forecast for this year downwardly, spurring speculation that more interest rate cuts will follow.
The RBA forecast that nation’s gross domestic product will rise 3 percent, compared to the previous estimate of 3.5 percent. Inflation growth was revised from 3 percent to 2.5 percent. The central bank wrote in its policy statement:
The assumed high level of the exchange rate and a weak short-term outlook for building construction are expected to result in subdued growth outside of the mining sector in the near term.
Risk aversion sentiment that was ruling markets yesterday wasn’t helping the Aussie. The MSCI Asia Pacific excluding Japan Index slipped 0.6 percent. Between domestic problems and bad news from overseas, it is no surprise that the growth-linked Australian currency was weakening.
AUD/USD slid from 1.0262 to 1.0170 — the lowest rate since January 9. AUD/JPY sank from 82.31 to 81.22, while the daily low of 81.17 was the lowest since February 1. EUR/AUD climbed from 1.2811 to 1.2918, the highest level since December 22 before closing at 1.2857.
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