The global commodities run is weighing heavily on the Tasmanian currencies with the Aussie only adding 7 points moving off its bottom after retail sales
The Reserve Bank of Australia made the announcement following its monthly policy meeting. A poll of 21 analysts had found all but one expected no change this week. The RBA said this morning that “The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are continuing to ease policy. Hence, global financial conditions remain very accommodative. Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low.”
Traders had expected Glenn Steven’s to turn dovish, but he was more or less neutral this morning giving the Aussie a bit of momentum. Mr Steven’s continued to say “While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year. This is a nod to the speech by Glenn Stevens which suggests we are in a period where lower GDP growth is not leading to slower employment growth.
The US dollar gained in the Asian session adding 5 points to 97.65 as it maintained its strength as expectations for an interest rate increase by the Fed holds course.
The kiwi weakened to trade at 0.6561 down by 3 points as the fall in commodity prices weighs heavily on the small economy as dairy prices see new lows. This is compounded by the lackluster performance in the Chinese manufacturing sector this week. The Caixin purchasing managers’ index showed China’s factory activity shrank more than earlier estimated last month and stoking concerns about the world’s second biggest economy. This normally weighs on currencies such as the kiwi dollar, whose economies are tied to the fortunes of China.