The New Zealand and Australian dollars fell to fresh lows today after the Reserve Bank of Australia unexpectedly lowered one of the highest interest rates in the developed world.
However, analysts have been dropping the two Antipodean currencies in recent weeks over speculation that growth would led to a looser monetary policy, though most of them were shocked by RBA’s move, which put it in the ranks of an increasing number of central banks opting for monetary stimulus in order to combat inflation and weak economic growth.
The Aussie traded at a nearly 6-year trough of $0.7635. The New Zealand dollar dropped 1.5 percent to trade at $0.7635, its weakest level since early 2011. However, the two currencies rose slightly as the day’s session went on, though they were still at least 1 percent lower.
“It’s a big move and I think any bounce should be sold into,” Graham Davidson, a London-based spot trader with National Australia Bank, told Reuters. “Generally when the RBA move, they tend to cut a handful of times. The feeling is of an economy where there is no source of growth, almost of despair.”
The Aussie traded 2.5 percent lower versus the yen at 89.43 yen, exceeding the support level of 90 yen, the first time to do so since February 2014. The RBA’s move follows that of the Denmark’s central bank, which auctioned 106.3 billion kroner ($16.3 billion) in January in an attempt to devalue its currency. This pushed foreign reserves to a new high of 564.1 billion kroner.
Elsewhere, the Russian ruble rose 3.5 percent to trade at 66.04 per dollar after crude oil futures rose 6.7 percent to steady at $52.91 per barrel. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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