Aussie declines to two-week trough after expected RBA policy decision

The Australian dollar fell in Asian trade on Tuesday against a basket of major rivals, extending losses for the fourth straight session against the dollar and plumbing a two-week trough following an expected decision by the Reserve Bank of Australia to hold interest rates flat.

The RBA’s tone in its policy statement indicated confidence that inflation will likely return to normality in the medium term, with economic activities slowing down. 

AUD/USD

AUD/USD fell 0.5% to 0.6524, the lowest since March 6, after losing 0.1% on Monday, on strong demand for the greenback. 

The RBA

As expected, the Reserve Bank of Australia maintained interest  rates unchanged at 4.35%, already the highest since November 2011. 

The RBA said in its policy statement that it’s still not guaranteed which path of interest rates will bring inflation back to targets, opening the door for either hiking or cutting rates. 

However, the tone used in the policy statement clearly eschews a move towards further policy tightening. 

 The RBA asserted that confidence must be gained in the sustainable movement of inflation towards 2% before moving to cut interest rates. 

Michelle Bullock 

RBA President Michelle Bullock said that interest rate cuts are not on the table until there’s certainty about bringing inflation to targets.

She asserted that the fight with inflation isn’t over yet, but strong progress has been achieved in combating high prices and setting inflation on the right course.