The
Australian dollar rebounded from four-month low versus the U.S. dollar on
Tuesday after the Reserve Bank of Australia opted to hold interest rates and
kept growth forecasts unchanged.
The
AUDUSD pair is currently trading higher at 0.6720 after hitting a high of
0.6726, noting that the session’s low was recorded at 0.6678, the lowest since
early October last year.
The
pair has been falling over the past five weeks due to the negative impact of
the spread of the Chinese coronavirus on financial markets.
Today,
the RBA decided to hold its cash rate at 0.75 percent, defying some forecasts
of seeing an interest rate cu by 25 basis points.
Some
analysts predicted an interest rate cut today to help the economy overcome the
impact of the summer wildfires and the outbreak of the epidemic in its trading
partner China. Futures still pricing a 73 percent chance the RBA would cut the cash
rate in April to 0.50 percent.
However,
the RBA remained upbeat on the economic outlook, as it reiterated growth
forecasts at 2.75 percent growth this year and 3 percent in 2021.
RBA
Governor Philip Lowe said the undergoing challenges would only
"temporarily weigh" on domestic growth, but reiterated that
the central bank would not hesitate to ease monetary policy if required.
The
Australian dollar has been dragged lower by the drop in commodities prices,
more specifically iron ore and copper, and the travel ban on Chinese tourists
to Australia, which accounts for 0.9 percent of Australia’s GDP.
The dollar index
soared for a second straight session at 97.73, noting that the spread of the Chinese
virus has been boosting haven demand on the green currency.