News Column

Australian Dollar Climbs After RBA Rate Decision

June 30, 2014

CANBERA (Alliance News) - The Australian dollar strengthened against the other major currencies in the Asian session on Tuesday after the Reserve Bank of Australia left its key interest rate unchanged at a record-low level, as widely expected by economists.

The Monetary Policy Board maintained the cash rate at 2.50%. The rate has been at the current level since August 2013.

The board assessed that the monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target, Governor Glenn Stevens said in a statement.

"On present indications, the most prudent course is likely to be a period of stability in interest rates," he said.

The statement also said continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Further, inflation is expected to be consistent with the 2-3% target over the next two years.

In economic news, Australia's performance of manufacturing index fell 0.3 points to 48.9 in June, from 49.2 in May, data from the Australian Industry Group showed.

The Australian dollar rose to nearly a 3-month high of 0.9452 against the US dollar, from an early low of 0.9412. At yesterday's close, the Australian dollar was trading at 0.9429. On the upside, 0.95 is seen as next resistance level for the aussie.

Moving away from early lows of 1.4477 against the NZ dollar and 1.0045 against the Canadian dollar, the aussie climbed to a 6-day high of 1.0782 and a 5-day high of 1.0085, respectively. The aussie was quoted at 1.0762 against the kiwi and 1.0059 against the loonie at yesterday's close. The aussie may test resistance near 1.08 against the kiwi and 1.01 against the loonie.

Against the euro, the Australian dollar advanced to 1.4477, from an early low of 1.4538. The euro-aussie pair closed yesterday's deals at 1.4511. If the aussie continues its uptrend, it is likely to find resistance around the 1.43 region.

The aussie strengthened to a 1-week high of 95.86 against the yen, from an early low of 95.41. The aussie-yen pair closed yesterday's deals at 95.54. The next possible upside target of the aussie is seen at 96.39 level.

A survey by Markit Economics and the Japan Materials Management Association revealed that manufacturing activity in Japan rebounded in June on account of increases in output and new orders. The Markit/JMMA manufacturing purchasing managers' index increased to 51.5 in June, more than the flash estimate of 51.1, from 49.9 in May.

Looking ahead, PMIs from major European economies, German unemployment rate for June and Eurozone jobless rate for May are due in the European session.

From the US, the Institute for Supply Management's manufacturing PMI for June and construction spending for May are set for release in the New York session.

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Source: Alliance News

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