AUD/USD Jumps to 0.7825 after RBA Sits

The Reserve Bank of Australia (RBA) on Tuesday held back on further monetary easing, surprising most market watchers who expected a second rate cut in as many months.  The central bank kept the benchmark lending rate at a historic record low of 2.25 percent, despite expectations it would do more to battle weak employment, easing inflation and sluggish corporate profits.

The RBA lowered rates by 25 basis points last month, its first cut in 18 months, following moves by some 20 central banks around the world that have loosened monetary policy this year.  The decision comes on the heels of a surprise announcement by the People’s Bank of China over the weekend to lower its rates, its third aggressive move to stimulate the economy in the last five months.

The Australian dollar surged nearly half a cent, from $0.7797 to $7834. Meanwhile, the benchmark S&P ASX 200 index fell into the red, down 0.3 percent.  In a statement, the RBA said it’s “appropriate” to leave rates steady for the time being but left the door open for further easing in the future where necessary. It maintained that growth will continue at a below-trend pace and sees domestic demand remaining weak.

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