Australian Dollar Declines after Central Bank Retains Interest Rates

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A stack of Australian notes

A stack of Australian notes

The Australian dollar plunged to a two-week low versus the U.S. dollar after the Reserve Bank of Australia hinted that interest rates may remain low for longer until the economic recovery stabilizes.

The Aussie was 0.5 percent lower at 93.59 U.S. cents by 6:36 a.m. in New York, the weakest since June 2. The yen tumbled 0.1 percent to trade at 101.97 per U.S. dollar. The Japan’s currency also fell 0.1 percent to 138.34 per euro, partly reversing an earlier 0.2 percent advance that saw it touch 138.54. The greenback rose almost 0.1 percent to trade at $1.3567 against the euro after earlier declining 0.3 percent to $1.3574 on Monday.

The Australian central bank released its minutes of June 3 meeting, which showed it will retain its current monetary policy until economic recovery becomes more certain. Currently, the bank maintains a cash rate of 2.5 percent, reported Bloomberg News.

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An excerpt from the minutes reads: “The expectation of substantial falls in mining investment, below-average growth of public demand and non-mining investment remaining subdued for a time implied that the pace of growth was likely to be a little below trend over the rest of this year and into next.”

The local Ministry of Commerce announced that non-financial investment in China in May declined 6.7 percent from a year ago. Economists had forecast this category of foreign direct investment in China, Australia’s main trading partner, to grow by 3.2 percent.

The Indonesian rupiah declined to the lowest level in four months against the dollar over fears that Indonesian budget and trade gaps will expand as Iraqi turmoil pushes up global crude prices. The currency fell 0.6 percent to end the day at 11,893 a dollar in a session that saw it touch 11,900, its lowest level since February 14. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com