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Australian Dollar Weakens as RBA Promises to Keep Interest Rates Low

June 17, 2014 at 6:50 by Vladimir Vyun

Banjo Paterson on Australian 10-dollar billThe Australian dollar dipped today as the Reserve Bank of Australia confirmed in its policy meeting minutes that it is going to keep interest rates at the current record low level for a prolonged time.

The RBA released the minutes of its June policy meeting today. Analysts considered the minutes to be a bit more dovish than was expected.

The central bank reiterated its concerns about the relatively high value of the Australian currency:

Members noted that the exchange rate remained high by historical standards, particularly given the further decline in commodity prices over the past month.

Indeed, the strength of the Aussie coupled with low prices for raw material leaves the export-driven Australia’s economy in a tough spot.

Concerning Australia’s economic growth, the RBA stated:

The expectation of substantial falls in mining investment, below-average growth of public demand and non-mining investment remaining subdued for a time implied that the pace of growth was likely to be a little below trend over the rest of this year and into the next, before gradually increasing.

As result, the bank said about the future monetary policy:

Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the Board judged that the current accommodative stance of policy was likely to be appropriate for some time yet.

AUD/USD dropped from 0.9401 to 0.9355, and AUD/JPY declined from 95.72 to 95.34 as of 6:50 GMT today. EUR/AUD advanced from 1.4437 to 1.4500.

If you have any questions, comments, or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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