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Australian Dollar Sinks Over 1% After RBA Makes Surprise Cut

May 3, 2016 at 11:10 by Vladimir Vyun

Australian dollar billsThe Australian dollar sank today, falling more than 1% against its major peers, after the Reserve Bank of Australia shocked the market, slashing its benchmark cash rate. Poor economic data from China weakened the currency further.

The RBA announced today that it is reducing its main interest rate by 25 basis points to 1.75%. It was a big surprise as the vast majority of analysts had not expected any move from the central bank. The recent weak inflation data was among the reasons for the cut as Governor Glenn Stevens mentioned:

Inflation has been quite low for some time and recent data were unexpectedly low.

Adding to the woes of the Aussie was the Caixin China Manufacturing PMI that fell unexpectedly to 49.4 in April from 49.7 in March. As for economic data from Australia itself, it was good as building permits rose in March instead of falling as specialists had predicted. Yet the single positive report was not enough to mitigate all the negative factors that were hurting the Australian currency.

AUD/USD plunged from 0.7665 to 0.7562 as of 11:05 GMT after rising to 0.7718 earlier today. EUR/AUD jumped from 1.5042 to 1.5310, bouncing from the daily low of 1.4935. AUD/JPY tumbled from 81.54 to 80.01, trading near the lowest level since March 1.

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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