RBA keeps rates at record low
The RBA has been keeping busy and remains in the spotlight. Ahead of the RBA policy meeting, the central bank surprised the markets with a long-term bond purchase worth AUD 4 billion. This followed an unexpected purchase on Friday of AUD 3 billion worth of short-term bonds. These aggressive moves came in response to the sharp rise in global borrowing costs, such as the increase in US Treasury rates. Australian yields have also been moving higher. The 10-year Australian bond yield touched a high of 1.91% on Friday, compared to 1.12% just one month ago. These purchases have sent Australian yields lower, with the 10-year bond currently at 1.75%.
The flurry of bond purchases by the RBA was followed by an uneventful policy meeting earlier today. As expected, policymakers maintained the Cash Rate at 0.10%, where it has been pegged since November. The RBA statement pledged that the record low rates would stay in place as long as inflation remained below the target level of 2 to 3 per cent. The statement noted that the current monetary policy is “continuing to help the economy by keeping financing costs very low” and is “contributing to a lower exchange rate than otherwise”. The RBA has watched with concern as the Australian dollar has appreciated sharply against the US dollar, with the Aussie punching above the symbolic 80-line just last week. The RBA would like a lower exchange rate, in order to maintain price stability and protect the critical export sector.
Overshadowed by the RBA meeting was mixed Australian data. Current Account shot up to AUD14.5 billion, up from 10.0 billion. However, the temperamental Building Permits took a sharp downturn, falling 19.4%.
- AUD/USD faces resistance at 0.7959, followed by resistance at 0.8116
- There is support at 0.7722. Below, we have support at 0.7672
- The 50-day moving average (MA) is situated at 0.7847
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