The Australian dollar is under renewed selling pressure on Tuesday. The Australian dollar US dollar exchange rate dropped to a low of US$0.6845. The pair is trading down 0.5% at the time of writing, just shy of the low of the day.
The minutes from the Reserve Bank of Australia’s (RBA) latest monetary policy meeting were more dovish than what investors were expecting. RBA board members acknowledged low consumption levels and signalled that it stands ready to cut interest rates further when it meets again in February.
The RBA has already cut interest rates three times this year, taking them to a record low of 0.75%. A fourth rate cut in nine months is now widely expected as the central bank attempts to stimulate an economy which is under pressure from rising unemployment, stagnant wages and poor business investment. The central bank indicating that the door is open to take rates to 0.5% has dragged on demand for the Aussie dollar.
Scepticism over future US — China relations further dented sentiment towards the China proxy, the Australian dollar. The US and China have agreed to an interim trade deal, whereby the US will reduce some trade tariffs and China will increase US agricultural purchases. However, the lack of details surrounding the agreement has kept the lid on any optimism.
Data & Fed Speak Support Dollar
The US dollar was on the front foot on Tuesday following encouraging comments from Fed official Robert Kaplan and stronger than forecast housing data.
Dallas Federal Reserve President Robert Kaplan expects the US economy to grow 2% in 2020 and inflation to remain muted. The dollar edged higher after his remarks.
US housing data was also supportive of the dollar. US housing starts rose more than expected with permits at a twelve and a half year high as low mortgage rates continue to boost the housing market and support the broader economy.
The dollar could get another boost as investors turn towards US manufacturing and industrial production data which are expected to rebound in November after months of sluggishness. Strong readings could help calm concerns over the health of the US manufacturing sector and push the dollar northwards.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 USD = 0.6784 AUD Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar. Or, if you were looking at it the other way around: 1 AUD = 1.4739 USD In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar. |
