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17 Sep 2013
AUD sheds gains on prospect of further RBA rate cuts
FXstreet.com (London) - The Aussie dollar shed gains overnight as the Reserve Bank Of Australia reiterated its stance that a further rate cut remains an option and that a weaker Aussie dollar would be advantageous to the economy.
The Aussie dollar had previously risen on risk-on flows as combined news of monetary “dove” Larry Summers exit from the race to succeed Ben Bernanke as Fed chairman, as well as news of US-Russia agreements over Syria, lead to positive conditions for higher-yielding currencies.
“Members agreed that the bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” said the RBA following its meeting in Sydney, adding: “Some further decline in the exchange rate would be helpful.”
AUD/USD declined to a session low of USD0.9288 on the minutes, after topping out at a high of USD0.9386.
The AUD/NZD 2-year swap spread widened to 70 basis points – the AUD 2-year swap settled yesterday at 2.83000.
Australian macro data remains soft, with Governor Glenn Stevens and his board have lowered borrowing costs by 225bps since late 2011, down to 2.5 percent in a effort to revive sluggish growth and a contracting labour market.
On the other side of the Tasman sea is a central bank pulling in the opposite direction, with rate hikes on the way following a strengthening of the economy. At last week’s Reserve Bank of New Zealand meeting, rates were held at 2.5 percent, but Governor Graeme Wheeler said rate hikes "will likely be required next year". NZD was knocked off multi-month highs of USD0.8222 following Sydney’s RBA meeting, with highs unlikely to be re-challenged before the end of the FOMC meeting tomorrow.
The Aussie dollar had previously risen on risk-on flows as combined news of monetary “dove” Larry Summers exit from the race to succeed Ben Bernanke as Fed chairman, as well as news of US-Russia agreements over Syria, lead to positive conditions for higher-yielding currencies.
“Members agreed that the bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” said the RBA following its meeting in Sydney, adding: “Some further decline in the exchange rate would be helpful.”
AUD/USD declined to a session low of USD0.9288 on the minutes, after topping out at a high of USD0.9386.
The AUD/NZD 2-year swap spread widened to 70 basis points – the AUD 2-year swap settled yesterday at 2.83000.
Australian macro data remains soft, with Governor Glenn Stevens and his board have lowered borrowing costs by 225bps since late 2011, down to 2.5 percent in a effort to revive sluggish growth and a contracting labour market.
On the other side of the Tasman sea is a central bank pulling in the opposite direction, with rate hikes on the way following a strengthening of the economy. At last week’s Reserve Bank of New Zealand meeting, rates were held at 2.5 percent, but Governor Graeme Wheeler said rate hikes "will likely be required next year". NZD was knocked off multi-month highs of USD0.8222 following Sydney’s RBA meeting, with highs unlikely to be re-challenged before the end of the FOMC meeting tomorrow.