The Reserve Bank of Australia today that it had reducted its interest rate to the lowest standing since 1964. The RBA reduced the official cash lending rate by a full percentage point today from 4.25 percent to 3.25 percent following a similar full percentage point reduction in December in order to combat a slowing economy and global financial turmoil. The RBA has now slashed the interest rate by 400 basis points since September when the rate was 7.25 percent. Today’s rate cut was widely expected and equaled market forecasts predicting the 100 point reduction.
Glenn Stevens, RBA Governor of Monetary Policy, commented on the Australian economy in the report, “The Australian economy has been more resilient than other advanced economies, but recent data nonetheless indicate that a significant moderation in demand and activity has been occurring. With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behaviour by both households and businesses is likely to see private demand remain subdued in the near term. With that outlook, and with capacity pressures now easing, it is likely that inflation in Australia will soon start to fall.”
Australian dollar gains in Currency Trading.
The Australian dollar has been gaining ground today in currency trading against most of the major currencies after the rate announcement. The Australian dollar has advanced versus the U.S. dollar to 0.6459 AUD per USD in the US at 1:44pm EST after opening at the exchange rate this morning of 0.6383(00:00 GMT).
The Aussie dollar has increased versus the Japanese yen with the AUD/JPY trading at 57.68 from today’s opening exchange rate of approximately 57.21 yen per aussie. The euro has also fallen versus the aussie today and the EUR/AUD trades at 2.0054 aussie per euro after opening the day at approximately 2.0169.
The aussie dollar has advanced against the New Zealand kiwi as the AUD/NZD trades at 1.2646 kiwi per aussie after opening the day at at 1.2617. Against the Canadian dollar, the aussie has increased from the 0.7919 opening rate to trading at 0.8002 later in the North American afternoon session.
AUD/USD Chart – The Australian Dollar advancing today against the US Dollar in Forex Trading but still trades below the 21-day moving average(blue).