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Australian dollar maintains gains after RBA decision

Australian dollar maintains gains after RBA decision

The Australian dollar maintains its gains against its US counterpart after the Reserve Bank of Australia decided today to hold interest rates at its lowest rate near zero, to meet market expectations and support the easing monetary and financial policies for the economy affected by the Corona pandemic.

RBA held interest rate 0.1% while maintained the quantitative easing program at the level of 100 billion Australian dollars during the last monetary policy meeting this year. Bank President Philip Lowe showed optimism about the recovery of the economy after reopening the country with Corona virus cases nearly zero.

Lowe noted that the economic recovery continues and recent economic data showed better performance than expected in general, but the recovery remains erratic according to expectations and may continue for long periods, relying heavily on support for fiscal and monetary policies.

The Australian Central Bank indicated that it is not expected to raise interest rates for at least three years, and that the bank is ready to intervene and do more if necessary, which would have pushed the Australian dollar down, but it was able to rise and maintain its gains during today's trades.

The decision to hold interest rates came as data indicated that the Australian economy rebounded sharply in the fourth quarter from its first recession in three decades.

The worst downturn in Australia since the Great Depression, high unemployment and weak inflation prompted the RBA to cut interest rates three times this year, as the federal government launched an A$-300 billion fiscal spending plan.

The stimulus fueled recovery in the real estate market as house prices jumped 0.8% in November, while new home approvals rose to their highest in 20 years.

On the other hand, the Australian dollar increased since the end of the first quarter of the year against the US dollar, reaching in September the highest level since the third quarter of 2018 at 0.7412, to take advantage of the weakness of the US dollar.

Yesterday, the Australian dollar rose and reached its highest level in 3 months against its US counterpart at 0.7406, before starting to decline, while today, eyes will focus on Fed Powell’s testimony before Congress. 

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