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Australian dollar rises after RBA interest rates cut

Australian dollar rises after RBA interest rates cut

The Australian dollar rose during Tuesday's trading, continuing to perform well since the start of the week as the Reserve Bank of Australia (RBA) cut interest rates in order to support the economy in the face of the economic risks posed by the Coronavirus.

The AUDUSD pair is currently trading higher at 0.6550 after hitting a high of 0.6566, noting that the session’s low was recorded at 0.6510.

The Australian dollar rose despite of the Reserve Bank of Australia's interest rate cut by 25 basis points to 0.5 percent, on hopes the RBA incentives would bolster the economy.

For his part, RBA governor Philip Lowe said the coronavirus epidemic was a "major hit" to the Australian economy and it was difficult to predict the magnitude of the long-term impacts.

He also stressed that the Board of Directors is closely monitoring developments and assessing the effects of the Coronavirus on the economy, as well as indicating that the Board is ready to ease monetary policy again if necessary.

The decision comes in what is expected to be the first in a series of incentives from central banks around the world to combat the economic repercussions of the Coronavirus.

This is considered the RBA's fourth reduction in less than a year, as the RBA had cut the interest rates three times in 2019 to support the country's economic conditions and the last time it cut interest rates was in October 2019, settling at a record low of 0.75 per cent at that time.

Investors expect the RBA to ease further by 0.25 percent by June, with expectation that policymakers would start quantitative easing for the first time in Australia.

Regarding Coronavirus, china's National Health Commission announced that China recorded 125 cases of the new Coronavirus on Monday, down from 202 on Sunday, the lowest record ever.

Outside China, South Korea has reported 600 new cases and three deaths of Coronavirus, bringing the total number of cases in the country to 4,812.

Meanwhile, the dollar index, which measures the performance of six major currencies against the US dollar, advanced 0.21 percent at 97.56.

Last week, the dollar dropped dramatically versus major currencies as markets priced an interest rate by 50 basis points this month.

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