AUD/USD’s Resilience May Force RBA’s Hand

Australia’s central bank will consider cutting interest rates on Tuesday to hold down a currency whose resilience threatens to upend any hopes of an economic recovery.

Traders are pricing in a 60 percent chance the Reserve Bank of Australia will lower the 2.25 percent cash rate to a record 2 percent, swaps data compiled by Bloomberg show. Eighteen of 29 economists in a Bloomberg News survey predict a cut. RBA board member John Edwards said in a Feb. 17 interview that “an even lower dollar” would be useful as the currency posted its first monthly gain since October.

Policy makers are seeking to bring down unemployment from a 12 1/2-year high after business spending slumped in an economy struggling to find new avenues of growth as miners curb expansion. RBA Governor Glenn Stevens’s global counterparts are easing to counter global disinflation, threatening to drive up the Aussie further and hurt domestic industries.

Bloomberg

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