Australian Dollar Weakens After Interest Rate Hold

The Australian dollar continued its decline, influenced by the interest rate decision announced by the Reserve Bank of Australia (RBA) in the early hours of Tuesday. The decision included keeping the interest rate unchanged at the December meeting of the Monetary Policy Committee.  

The AUD/USD pair dropped to 0.6376 compared to the previous day’s close of 0.6439. The pair reached a daily high of 0.6442 and a low of 0.6365.

The RBA statement said, “The Board is more confident that inflation is declining in line with recent forecasts. However, upside risks remain,” indicating the possibility of a resurgence in inflation.

The latter part of the central bank’s message highlighted the possibility of seeing a rise in inflation rates again, which could prompt monetary authorities to further cut interest rates in the future. This would negatively impact the returns on Australian currency and assets, leading to a decline in the currency.

The RBA held interest rates steady at 4.35% in the December meeting. Michele Bullock, Governor of the Reserve Bank of Australia, said in a statement following the interest rate decision that “the upside risks to inflation have diminished considerably, but they have not disappeared entirely.”