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Australian Dollar to US Dollar Exchange Rate Tight after Caution from RBA Governor

US Dollar Exchange Rates

RBA Resistance to Interest Rate Hike Leaves AUD/USD Rate Close

The Australian Dollar has traded in a narrow range against the US Dollar on 8th February, following cautious comments from Philip Lowe.

Philip Lowe, the Governor of the Reserve Bank of Australia (RBA), has stated that he can’t see a ‘strong case’ for adjusting interest rates in the near-future.

The RBA’s last interest rate hike was back in November 2010 and many traders feel that the next rate increase is long overdue.

Playing down expectations of immediate action, Mr Lowe has stated;

‘Our circumstances are a little different.

We are still some way from what could be considered full employment and our central scenario for inflation is for it to remain below the mid-point of the medium-term target range for the next couple of years.’

Such cautious comments have reduced demand for the Australian Dollar and come after the RBA left interest rates on hold earlier in the week.

Falling AU Business Confidence Limits AUD/USD Movement

Another factor preventing an Australian Dollar to US Dollar advance today has been the news that the Q4 NAB business confidence index has declined.

The decrease from 8 points to 6 wasn’t seen as the end of the world, as NAB analysts explained the data by saying;

‘Despite reporting a slight deterioration in confidence during Q4, firms still indicated even stronger investment intentions over the next 12 months.

Firms that experienced a deterioration in confidence are largely pointing to wage costs, along with the business outlook and broader margin pressure as the primary factors behind the change.’

US Dollar Strengthens as Stock Markets Stabilise

Having fluctuated recently because of alarming stock market slides, the US Dollar has since found a stable footing and appreciated against the Australian Dollar and the Euro.

The USD has risen in value because US stock markets have largely settled. This was first triggered by concerns about faster-than-expected interest rate hikes in the US.

Two recent speeches from Federal Reserve officials may have reduced concerns about rapid rate hikes, however.

Charles Evans and John Williams have both downplayed the need for immediate US interest rate hikes, which has raised hopes for more controlled rate hikes this year.

There is also a growing conclusion that the recent market upset was merely a correction, instead of the beginning of sustained losses in stocks.

AUD/USD Exchange Rate Forecast: Australian Dollar Advance Possible on RBA Statement

The Australian Dollar could regain lost ground against the US Dollar on 9th February, when the Reserve Bank of Australia (RBA) will release a monetary policy statement.

Despite Lowe’s recent comments, the overall bank outlook could be more optimistic; if this is the case then the Australian Dollar could advance against the US Dollar.

The next source of US Dollar influence is likely to be a pair of speeches from Federal Reserve officials today, specifically Patrick Harker and Neel Kashkari.

If both men suggest that US interest rate hikes could be coming later in 2018, the US Dollar could rise further against the Australian Dollar.