RBA Once Again Cuts The Key Rate - Australian Dollar Higher
The RBA (Reserve Bank of Australia) cut the cash rate yesterday, by 25 basis points (0.25%) to 3% effective 5th December. This marks the lowest level seen since the GFC (global financial crisis). This latest cut by Governor Glenn Stevens and his board means RBA has essentially lowered the key rate by 175 basis points since embarking on the cycle of cutting initiated in late 2011.
The elevated Australian dollar currency rate is a key focus in this respect as Stevens advised the Australian dollar remained “higher than might have been expected". The local currency has seen a 62% rise over the past four years. Elevated currency rates are seen as an unfavorable element for industries including manufacturing and tourism.
Governor Stevens likewise advised that "a further easing in monetary policy was appropriate now,", pointing out that it might "help to foster growth in demand and inflation outcomes consistent with the target".
The "Aussie" (Australian dollar to US dollar rate) actually advanced following the rate decision as the cut was likely priced in by the market; a case of sell the rumor and buy the fact in this instance. Ultimately Australia has a high interest rate in comparison with other countries, where rates are often close to zero. The AUD/USD rate is trading at 1.0471 at this time and just under the key 1.0500 forex technical analysis round number area.