Australian rates decision surprises markets
The Australian dollar softened as the Reserve Bank of Australia surprised the market by opting to leave interest rates on hold at 5.5 per cent. Some 18 of 23 economists polled by Bloomberg had expected a further 25-basis point hike.
“The RBA seems to be implicitly recognising the risk of a repeat of the drop in consumer confidence that followed the hike in March,” said a senior currency strategist.
“The RBA has showed significant common sense. This is a welcome surprise. While it will help to take the wind out of the sails of the Australian dollar rally, the weakness in the US dollar remains a threat to Australian exporters generally.”
The Aussie dollar dipped to $0.7669 against the US dollar and A$2.4513 against sterling.
Some still expect the RBA to raise rates in June instead, but a dollar bloc analyst expected a future hike now depended on data flow, with first quarter inflation data due on April 27 now “looming large”.
“The RBA seems to be implicitly recognising the risk of a repeat of the drop in consumer confidence that followed the hike in March,” said a senior currency strategist.
“The RBA has showed significant common sense. This is a welcome surprise. While it will help to take the wind out of the sails of the Australian dollar rally, the weakness in the US dollar remains a threat to Australian exporters generally.”
The Aussie dollar dipped to $0.7669 against the US dollar and A$2.4513 against sterling.
Some still expect the RBA to raise rates in June instead, but a dollar bloc analyst expected a future hike now depended on data flow, with first quarter inflation data due on April 27 now “looming large”.
April 6, 2005
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