The Australian Dollar to US Dollar (AUD/USD) exchange rate declined on Tuesday as investors responded to comments issued by Reserve Bank of Australia (RBA) Governor Glenn Stevens.
Stevens asserted that interest rates will remain low as Australia needs to start seeing expansion in sectors outside of the resources industry. While the prospect of interest rate stability would usually support the Australian Dollar, the currency did come under pressure as a result of insinuations that the RBA could introduce additional stimulus measures.
Stevens commented; ‘Inflation is well under control and is likely to remain so over the next couple of years. In such circumstances, monetary policy should be accommodative and, on present indications, is likely to be that way for some time yet. But for accommodative monetary policy to support the economy most effectively overall, it’s helpful if pockets of potential over-exuberance don’t get too carried away.’
When hinting at the possible implementation of macro-prudential tools to restrain the growth in investor credit, Stevens stated; ‘[You] might contemplate whether some suitably calibrated and focused action to help ensure sound standards, and that might lean into the price dynamic, may be appropriate.’
The central bank chief also asserted that Australia entered recession in 2008.
The AUD/USD exchange rate held its over 0.2% decline following the publication of the US NAHB Housing Market Index. The measure advanced from 54 to 58 in November, beating forecasts for a figure of 55.
The AUD/USD exchange rate was trading in the region of 0.8725.
The Australian Dollar to Euro (AUD/EUR) exchange rate lost over 0.4% on Tuesday as investors responded positively to an unexpectedly strong economic sentiment survey for the Eurozone’s largest economy.
The German gauge of economic sentiment surged from -3.6 to 11.5 in November – a far more impressive improvement than the rise to 0.5 anticipated by economists.
According to Reuters; ‘It was the first increase in sentiment since December last year. The Euro rose to a day high against the Dollar and Bund futures reversed gains after the survey was published.’
Overnight the AUD/EUR exchange rate could experience movement as a result of Australia’s Westpac Leading Index and the nation’s Skilled Vacancies figures.
Investors will also be looking ahead to tomorrow’s Construction Output and Current Account reports for the Eurozone.
Signs of improvement in the currency bloc will be Euro-supportive.
The Australian Dollar to Euro (AUD/EUR) exchange rate was trending in the region of 0.6960.
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