The Aussie Dollar remains under pressure.
It weakened last week, when support for US Dollars increased as the Federal Reserve announced plans to further reduce their bond-buying (quantitative easing or money printing) programme. Last week, the Fed said it will reduce its asset purchase spending by a further US$ 10bn.
Concerns over emerging markets may continue to dampen the AUD as investors favour so-called safe havens like the Japanese Yen and USD — especially amidst fears over a slow-down of growth in China. The fears were also exasperated by Argentina’s announcement that it will loosen its foreign currency controls, and continuing political tensions in Turkey.
The Aussie strengthened on Tuesday, as the Reserve Bank of Australia Governor, Glenn Stevens, backtracked on earlier RBA statements about the Aussie being too strong. Subsequently, the AUD strengthened against all of its 16 major currency peers. The RBA kept interest rates unchanged at 2.5%, giving mention that the weaker AUD will help achieve balanced growth. After cutting interest rates by 2.25% since late 2011, it looks as though we have bottomed out and that interest rates could start increasing to combat an increase in home prices and inflation.
Looking ahead to this week, today the Reserve Bank of Australia decided to keep the Cash Rate unchanged for the time being. According to Glenn Stevens, “the exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy”.
By Jaco Herselman
Exchange rates as of 08:40 (GMT), February 4, 2014
GBP / AUD: 1.8335
EUR / AUD: 1.5192
USD / AUD: 1.1250
NZD / AUD: 0.9155
Note: The above exchange rates are based on “interbank” rates.
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