By TraderVox.com
Tradervox.com (Dublin) – The Reserve Bank of Australia held its benchmark interest rate at the highest among the developed nations as global economy seems to stabilize and inflation in the country starts to pick. The Aussie has improved to five week-high against the dollar as risk appetite boosted commodity related currencies.
According to a statement released yesterday, the RBA governor Glenn Stevens left the overnight lending cash rate at 3.25 percent. Most economists were expecting the RBA to cut interest rate to 3 percent. According to Stevens’ statement, the prices data is slightly higher than bank expectation and the global economy is showing signs of improvement. He added that the board considered these figures to come up with the monetary policy.
The decision to keep current interest rates is seen as a move to shield the economy against inflation risks. The nation’s economy relies on China as a trading partner, where it exports most of its products. Aussie remains above parity against the greenback despite acceleration in US economic growth.
According to Daniel Martin, a Singapore-based economist at Capital Economics Ltd, the RBA will not act unless the global economy takes a turn to the worst. Martin predicts that the Australian central bank will keep the rates unchanged till late 2013 as it seeks to boost non-mining sectors before the mining sector peaks.
The Australian dollar climbed to $1.0438 against the greenback after the decision was announced. This is the highest it has been since September 28. The Australian economy depends on exports to China with more than five percent of the GDP coming from the Iron ore exports to China. Chinese data have showed a rebound in the non-manufacturing sector which has been on a slowdown for the last 19 months.
The Australian dollar has increased by 57 percent in the last four years. This has lead to a loss of 37,000 manufacturing jobs in the last two years. The construction sector is reported to have lost 70,000 jobs in the past year. A report today is expected to show an increase of 600 jobs in the country, while the unemployment rate is expected to rise by 0.1 percent.
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