By TraderVox.com
Tradervox (Dublin) – The Australian dollar dropped to eleven-week low after the Reserve Bank of Australia pointed out that it would review the monetary policy downwards if the need arises. To add to the Aussie’s downward pressure, the country unexpectedly registered a trade deficit. The report of the Reserve Bank’s intention to cut interest rate hit the market after the member of RBA met on Tuesday. Positive reports from the US also pushed the Aussie further down against the greenback. The New Zealand dollar also dropped against the US dollar ahead of a report expected to show a recovery in the US job market.
According to the Minutes of the Fed’s meeting released on Tuesday, the FOMC members are concerned about the US economy and they are still keeping the stimulus package on the table if the US economy lost momentum. The Fed also insisted on keeping the interest rates low up to late 2014. So far, the Fed has bought $2.3 trillion of bonds since December 2008 to June last year. This was done in two rounds and the third round is still an option for the Fed if the economy deteriorates.
In Australia, the RBA has been described as being on the “easing bias” by Lee Wai Tuck who is a Currency Strategist at Forecast Pte min Singapore. This is due to the concerns about the slowing exports that are pushing the Australian dollar down against major currencies.
The Aussie dropped by 0.4 percent against the US dollar to trade at $1.0289 after it had dropped to $1.0264, which is the lowest it has been since January 16 against the green back. The Aussie was also weak against the New Zealand dollar when it dropped to its weakest since October 6 exchanging at NZ$1.2576. The kiwi was weak against the dollar falling 0.2 percent to exchange at 81.74 US cents.
RBA reported that it would reassess its inflation outlook after seeing the forthcoming key data on prices. This would pave the way for a change in monetary policy if the prices’ data is not as expected. Currently, the RBA has left the interest rate at 4.25 percent.
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