Australian Dollar continues slide as currency strength prompts monetary easing fear

Australian Dollar continues slide

The Australian Dollar has declined against all of its major peers after the nation’s treasury said that the central bank will be able to ease its monetary policy if the strength of the currency’s gains harms the economy. The move comes after the Aussie Dollars strength has threatened to limit the appeals of Australian exports, exports that are vital to the nation’s economy. 

“There was a report from the Treasury which said Aussie strength is still a concern the RBA is watching,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Aussie is coming off quite sharply.”

The Reserve Bank of Australia will next week release minutes of its Aug. 7 policy meeting, at which policy makers left interest rates unchanged at 3.5 percent. RBA Governor Glenn Stevens has refrained from cutting rates at the past two meetings after lowering the benchmark by 1.25 percentage points from November to June to bolster the economy.

“While the Australian dollar is now well above its post- float average, it appears to be at a level consistent with what might be expected, given the changes in its fundamental determinants,” the Treasury said in a report entitled “Understanding the appreciation of the Australian dollar and its policy implications” on its website today.

The Pound made gains against a basket of currencies yesterday thanks to the UK economy posting stronger than expected retail sales figures. The Pound advanced 13 of its 16 major peers after economists said the data added to evidence that Britain’s economy may have shrunk less in the second quarter than the 0.7% contraction previously estimated by the Office for National Statistics. The Pound gained 0.4% to $1.5743 after weakening as much as 0.3%. It jumped to as high as $1.5744, its highest level since July 30th. Against the Euro, Sterling weakened 0.2 % to 78.50 pence, after reaching 78.13 pence, the strongest level since July 31.

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Australian Dollar continues slide as currency strength prompts monetary easing fear

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