Fundamental Comment

Australian dollar rises as RBA holds interest rates

Australian dollar rises after RBA holds interest rates

The Australian dollar rose slightly during Thursday's trading, despite the Reserve Bank of Australia's Monetary Policy Committee decision to keep interest rates unchanged to support the Australian economy in the face of the spread of the coronavirus.

The AUDUSD pair is currently trading higher at 0.6429 after hitting a high of 0.6430, noting that the session’s opening price was recorded at 0.6423.

The Australian dollar's rise came despite the RBA's decision to maintain current monetary policy measures, including keeping the interest rate at 0.25%, in line with market expectations.

According to the basic scenario, Australia GDP would decline by about 10% during the first half of 2020, and by about 6% for the whole year, followed by a recovery of about 6% over the next year.

However, in different RBA scenarios, inflation remains below 2% over the next few years.

The statement also showed the RBA will not raise interest rates until progress is made in the economy, and as inflation starts creeping towards its 2-3% target range.

Governor Philip Lowe hopes for a stronger recovery in Australian economy if there is "more substantial progress in containing the coronavirus in the near term and there is a faster return to normal economic activity."

As for the latest developments in the Coronavirus, Australia recorded 6,847 infections and 96 deaths, while New Zealand had 1,137 cases and 20 deaths.

Meanwhile, the dollar index, which measures the performance of six major currencies against the US dollar, advanced 0.35 percent at 99.92, as the rise in US-China tensions raised safety demand.

It is worth mentioning that the Aussie dollar has been on the rise versus its U.S. counterpart since hitting a trough at 0.5509 on March 19. 

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