The Australian dollar rose sharply today after the latest RBA interest rate decision and the banks stance to take a neutral view on monetary policy.
The Australian dollar closed out the evening at US77.70c up from US76.04c the previous day.
The market was expecting some direction from the central bank on its stance regarding interest rates but the RBA gave no hints of any further rate cuts which left investors guessing,
"There was no forward guidance that might have suggested the RBA is open to further rate cuts," said Bill Bovingdon, the Sydney-based chief investment officer at Altius Asset Management told Bloomberg.
"There was a hope that maybe the RBA would at least make some noises that an easing bias might be in place again, but they chose not to." He added.
Some analysts like Paul Dales, chief Australia and New Zealand economist at Capital Economics predict that although the RBA kept rates on hold this time round, and may not make a move in the next couple of months, there is a chance that rates will be lower by the end of the year adding significant pressure on the Australian dollar.
"Although the door for more loosening has been left open, there was no hint that the RBA is currently considering following the cuts in rates in February and May with further reductions in the coming months. This will prompt some to conclude that rates have reached a floor," he noted
“The RBA's on-hold decision is nothing more than a pause in the loosening cycle that could yet result in rates falling to 1.5 percent by the end of the year. Such a move would catch the markets on the hop," Mr Dales predicts the Aussie dollar will fall to US70c by December.
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