Australian Dollar to US Dollar (AUD/USD) exchange edges away from 4-month high as RBA comments weigh

Australian Dollar to US Dollar exchange rate chart

The AUD to USD exchange rate softened away from a four-month high on Tuesday and eased downward against the GBP and EUR after the Reserve Bank of Australia showed signs that it may be about to try and talk down the currency’s recent strong run.

The ‘Aussie’ initially climbed to a fresh four-month high after the RBA maintained interest rates at the record low level of 2.5%, a move that had been forecast by the markets. Economists don’t foresee the RBA raising rates until next year.

At the meeting Stevens reiterated what he said at the previous policy meeting by saying that the Bank expects a ‘period of stability in interest rates’. Economists saw the reuse of those words as a means to bolster business and consumer sentiment.

The currency then softened following the comments by RBA governor Glenn Stevens. At first the market dismissed the comments but as the session wore on they too his words as a possible sign of trying to temper the ‘Aussie’s’ upwards momentum.

“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months,” Stevens said. Economists took those comments as more dovish than they were expecting.

Some economists said Mr Stevens’ statement showed that the Australian Dollar wasn’t doing what the RBA needed it to do, as it attempts to boost underperforming sectors of the economy to offset declining mining investment.
Some expect the RBA to start talking the Australian dollar down if the currency continues to rise.

“That’s a space to watch, if it keeps going up they’ll have to start jawboning it again,” Said an economist at UBS.

The Australian Dollar to US Dollar exchange rate could push higher later in the session if today’s US manufacturing PMI data disappoints and the Eurozone’s unemployment data comes in worse than forecast.