Australian Dollar Falls After RBA Lowe Suggests Further Easing
July 24 2019 - 11:02PM
RTTF2
The Australian dollar declined against its major counterparts in
the Asian session on Thursday, after Reserve Bank of Australia
Governor Philip Lowe suggested that the central bank is prepared to
cut rates further, if demand growth is not sufficient.
"…if demand growth is not sufficient, the Board is prepared to
provide additional support by easing monetary policy further," he
said in a speech titled "Inflation Targeting and Economic Welfare"
in Sydney.
It is reasonable to expect an extended period of low interest
rates, Lowe added. It will be some time before inflation is
comfortably back within the target range.
The board is strongly committed to bring inflation back to the
target and continue delivering an average inflation between 2 and 3
percent.
The bank had reduced its benchmark rate in June and July, by 25
basis points each. This was the first back-to-back rate cut since
mid-2012.
The governor said two rate cuts will support demand. Recent tax
reductions, higher commodity prices, some stabilization in the
housing market, ongoing investment in infrastructure and a lift in
resource sector investment will also support the economy, he
noted.
The bank expects these factors together with rate cuts to put
pressure on the economy's supply capacity and lift inflation in a
reasonable timeframe, Lowe said.
The aussie dropped to a 2-week low of 0.6964 against the
greenback, from a high of 0.6984 seen at 9:30 pm ET. If the aussie
slides further, 0.67 is likely seen as its next support level.
The aussie that ended Wednesday's trading at 75.47 against the
yen depreciated to a 2-week low of 75.28. Next immediate support
for the aussie is possibly seen around the 73.5 region.
Data from the Bank of Japan showed that Japan producer prices
rose 0.7 percent on year in June - shy of expectations for 0.8
percent and down from the upwardly revised 0.9 percent gain in
May.
On a monthly basis, producer prices eased 0.1 percent after
sliding 0.2 percent in the previous month.
The Australian currency fell to a 1-week low of 1.5987 against
the euro, compared to 1.5967 hit late New York Wednesday. The
aussie is seen facing support around the 1.61 level.
The aussie pared gains to 1.0399 against the kiwi, from a high
of 1.0419 it touched at 6:30 pm ET. The currency is likely to find
support around the 1.025 level.
After an uptick to 0.9174 against the loonie at 9:30 pm ET, the
aussie pulled back to hit a weekly low of 0.9147. The aussie is
poised to find support around the 0.89 level.
Looking ahead, German Ifo business sentiment index for July is
due in the European session.
The European Central Bank's interest rate decision is slated for
release at 7:45 am ET. Economists expect the main refi rate to be
kept at a record low of zero percent and the deposit rate at -0.40
percent.
The U.S. durable goods orders for June and weekly jobless claims
for the week ended July 13 will be featured in the New York
session.
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