RBA Minutes: Lower Australian Dollar Aiding Economic Transition

Australia’s central bank said a weakening currency is assisting a transition away from mining investment, while adding that accommodative policy remains appropriate to support growth. “Economic activity had generally been more positive over recent months,” it said Tuesday in minutes of its Aug. 4 meeting when interest rates were left at a record-low 2 percent. “The further depreciation of the Australian dollar was expected to impart stimulus to the economy through stronger net exports.”

Policy makers are gaining a degree of confidence that post-mining boom growth is gaining traction, citing recent stronger data including hiring. The Reserve Bank of Australia is also relying on its American counterpart to raise rates later this year, which could spur a further reduction in a local currency that has already dropped 8 percent in the past three months.

“There was likely to be a sizable market impact notwithstanding how well telegraphed the change in policy had been,” the RBA said of an expected Federal Reserve move. “It was likely that financial market volatility would increase and the U.S. dollar could appreciate further, including against the Australian dollar.”

Bloomberg

Stuart McPhee
Stuart McPhee
Australian private trader for nearly 20 years, author, trading coach, licensed adviser and regular speaker at major trading events all around the world. Graduate of RMC Duntroon and former Australian Army Officer.