AUD/USD at 0.8750 as RBA Sits

The Reserve Bank of Australia (RBA) on Tuesday kept interest rates unchanged, as expected, and hinted that rates will stay stable for a while, despite the sharp slide in the Aussie dollar.  The central bank held key interest rates at a record low of 2.5 percent, where they have been since August last year.

In its statement, the RBA maintained that it is “prudent to have a period of stability in rates,” despite speculation policymakers may drop that line in light of the rapidly-weakening Australian dollar.  The central bank, which has made no secret of its preference for a weak currency, said the Aussie remained high by historical standards.

“We’re still a touch above where the RBA is completely comfortable but they will think what’s happened and the momentum in terms of the currency’s downward movement is a pretty postiive move,” said Paul Bloxham, chief economist for Australia and New Zealand at HSBC.

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