AUD/USD Exchange Rate Forecast: Australian Dollar Trends Lower, RBA Keeps Rates On Hold

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United States Dollar (USD)

On Tuesday the Australian Dollar to US Dollar (AUD/USD) exchange rate lost over 0.4% as investors bet that this week’s US employment report will impress.

The South Pacific currency tumbled on Monday as China’s Manufacturing PMI printed below expected levels.

However, the asset went on to recoup some of its initial losses after the Reserve Bank of Australia (RBA) asserted that it would be keeping fiscal policy accommodative for a considerable period.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Sheds 0.45%

The RBA left interest rates on hold and the central bank’s accompanying policy statement was the mirror image of remarks issued after the previous month’s gathering.

While acknowledging the price slump in Australia’s key commodities, RBA Governor Glenn Stevens stated that stability in interest rates for the time being is the ‘most prudent’ course.

He continued; ‘Most data are consistent with moderate growth. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters’.

Stevens also reiterated comments about the Australian Dollar being overvalued and detrimental to domestic growth.

While the Australian Dollar derived some support from the expectation that interest rates will remain on hold for the time being, some industry experts are betting that the central bank may have to cut rates next year rather than raising them, as had initially been projected. This speculation put pressure on the ‘Aussie’.

Australia’s Building Approvals report had little impact on the Australian Dollar to US Dollar (AUD/USD) exchange rate given that the 11.4% month-on-month gain merely made up for the -11.2% decline recorded in September.

AUD/USD Weakens on US Employment Expectations

Weakness in the Australian Dollar to US Dollar (AUD/USD) exchange rate persisted in the North American session as the ‘Greenback’ derived support from bets that this week’s US Non-Farm Payrolls report will show another month of employment gains of more than 200,000.

According to industry expert Neil Jones; ‘I’m a big fan of the US Dollar. We’ve seen some very encouraging economic data and the upside is likely to continue. The policy divergence between the Fed and the rest of the developed economies is supportive for the Dollar.’

Australian Dollar to US Dollar Exchange Rate Forecast

The Australian Dollar to US Dollar exchange rate could experience additional fluctuations during the Australasian session as Australia publishes its AiG Performance of Service Index for November and third quarter growth data.

If the Australian economy is shown to have expanded by the 0.7% predicted in the third quarter of the year (up on growth of 0.5% in the second quarter) the Australian Dollar may be boosted.

Tomorrow’s US ISM Non-Manufacturing Composite index and Markit Services PMI could also have an impact on the AUD/USD pairing, as could the publication of the US Federal Reserve Beige Book.

The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trading in the region of 0.8455.

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