The Reserve Bank of Australia cut the interest rate in its latest decision. Nevertheless, the Australian dollar did not take it that badly and is now rising on the minutes from that meeting.
The rate cut was well-telegraphed (as in New Zealand) and future monetary policy does not look too dovish and this helps the A$. The currency did not react swiftly but is rather enjoying a gradual advance.
The meeting minutes revealed some positivity. There is room for strong economic growth given inflation is to remain low for some time. What about the housing bubble? Well, also here, they saw “diminished risks” and even some risk of oversupply in some areas, not exactly bubble worries. Jobs are expected to remain stable
As usual, they also saw risks to the higher exchange rate, something that could complicate the transition away from the mining sector. We also got the regular warning from central banks these days about “growing uncertainty” from China an from elsewhere.
Nevertheless, the bottom line is that no rate cuts are on the cards for the near future, and given the weakness of the US dollar, the pair has reasons to rise.
More: AUD Carry Metrics Not Flashing Red Yet; Caution On NZD – BofA Merrill