In its efforts to shore up the Australian economy amid the slump in commodity prices, the Reserve Bank of Australia has focused on reducing the strength in the Australian dollar to remain competitive in international markets. To accomplish this stated goal, the RBA targeted exchange rates by dropping the key interest rate in order to meet the objective of AUDUSD 0.7500. At this point the currency is trading markedly higher after the latest move to cut rates from 2.25% to 2.00% earlier in the month. The Reserve Bank of Australia released minutes from its latest monetary policy meeting overnight, sending the Australian dollar lower after concerns that further rate cuts were inevitable. This comes amid a government budget which is shifting more cost cutting than fiscal stimulus. The Australian dollar has rebounded modestly since dropping, but will likely reflect anticipation of lower rates.
Aussie Still Overvalued
Daily Analysis - 19/05/2015