The Australian dollar jumped to its highest level in four months against the greenback after the Reserve Bank of Australia (RBA) left interest rates unchanged at a record low of 2.5 percent.
The currency hit $0.9310 briefly following the decision before pulling back to $0.9270.
The decision was widely expected given signs past policy easing was working to stimulate the economy and they RBA said policy would remain stimulative in order to boost demand and offset the drag from a cooling mining boom.
“Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time,” RBA Governor Glenn Stevens said in a brief statement after the bank’s April policy meeting.
According to Matthew Circosta, economist at Moody’s Analytics, the strengthening of the Australia economy could bring price pressures back to the fore.
“The non-tradables and import inflation component in the CPI [consumer price index] has been steadily rising as the [Aussie] dollar weakens,” Circosta said. “Overall, inflation may be a problem for the RBA down the track.”