RBA Minutes and Remarks Give Boost to Aussie

The Australian Dollar (AUD) is rising across the board against major currencies on Tuesday, as recent remarks by the Governor of the Reserve Bank of Australia (RBA) are supporting the Aussie.

RBA Governor Philip Lowe said in his annual speech to the Anika Foundation that Australia has now turned the corner, which means that the Australian economy has passed that worst phase of the downturn.

However, Lowe warned that the recovery could be bumpy, with some challenges expected to remain down the road.

The biggest support to the Aussie came from the governor refusing claims that the exchange rate is misaligned with fundamentals.

Additionally, Lowe welcomed extending government support to businesses, and ruled out the possibility of interest rate cuts with the main rate currently at 0.25%.

Moreover, minutes of the RBA July meeting showed today that lowering interest rates remains extraordinarily unlikely.

On July 7, the RBA maintained its main interest rate at 0.25% in a widely expected move.

The Reserve Bank of Australia then said that the accommodative approach will be maintained as long as it is required.

In his speech, Lowe also said that the RBA is not out of options in dealing with the COVID-19 crisis, which has been described as the worst for Australia since the 1930s.

Apart from cutting interest rates, the Australian central bank could, according to Lowe, purchase government bonds or change the parameters of the term funding facility.

The RBA governor reiterated his belief that a weaker Aussie could mean more jobs for the Australian economy, especially at a time unemployment in Australia is near its highest level in two decades.     

Lowe also refused the idea of experimenting with monetary financing in light of the persistently low inflation.

As for the Aussie’s performance today, which is also supported by the rise in commodity prices, with oil prices on the rise and gold and silver achieving new multiple-year record highs, it was able to achieve noticeable gains against both the rising Euro and the declining US Dollar.

The AUD/USD is trading at 0.71331, up by 1.67% for the day, after moving in a range between ‪0.71411 and 0.70150, making its best levels in 2020.

Meanwhile, the AUD/EUR is up 0.92% at 0.6185.

The AUD is also up against the Japanese Yen (JPY) by 1.22%, the Canadian Dollar (CAD) by 1.01%, and its New Zealand rival by 0.68%.

AUD/GBP rose by 0.95%, while the AUD/CHF surged by 1%.

Tomorrow, the AUD could receive some support from the preliminary reading of the June retail sales, which are expected to register a growth lower than that of May. After rising by nearly 17% in May, Australian retail sales are expected to grow by a little over 7% for last month.

The RBA governor noted in his remarks today that businesses and consumers in Australia are not using the historically low interest rates to increase spending, but to pay off debts.

The Westpac lending index is also due tomorrow, while Thursday will see the release of the business confidence index by the National Bank of Australia, as well as the trade balance data.