Posts Tagged ‘Reserve Bank of Australia’

New Zealand’s dollar surged to the highest since May 2015 after traders deemed the central bank’s decision to cut borrowing costs was insufficiently dovish amid the global ardour for yield spurred by unprecedented global monetary easing.

The kiwi climbed against all of its 16 major counterparts after the Reserve Bank of New Zealand cut its official rate to a record, aping the reaction of its Australian counterpart when officials there lowered borrowing costs earlier this month.

Some investors had been looking for a more aggressive easing signal from the central bank, which indicated it would cut rates at least once more to boost weak inflation. The US dollar advanced against the euro after last week’s better-than-expected jobs data bolstered a view that the Federal Reserve is among few central banks in developed economies whose next policy move will be to tighten.

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Australia’s dollar rose to a one-month high and bond yields rebounded from the lowest ever as the central bank refrained from cutting interest rates.

The Reserve Bank of Australia left the benchmark rate at a record-low 1.75 percent, as forecast by all but one economist surveyed by news agency Bloomberg. Most expect the central bank to resume easing in August after a quarter-point reduction in May in response to a record-low core inflation reading.

“Last night’s RBA policy statement was judged as lacking an explicit easing bias,” said Jane Foley, a senior currency strategist at Rabobank International in London. “While this assessment has lent the Australian dollar significant support this morning, there are sufficient negative nuances contained within the RBA’s policy outlook to infer that the prospect of an August rate cut remain very strong.”

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The Australian dollar has been weakening as a result of falling oil prices. “Jawboning” or the false market commentary has also been blamed to be partially responsible for AUD weakening.

The currency is under pressure with predications that the Aussie Reserve Bank will lower interest rates in response to other central bank decreases and lesser inflation expectations.

The cuts are contagious – currencies are weakened. Central banks in Mexico and South Africa are to release policy decisions and Mexico’s central bank is keeping policy rates on hold.
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