Australian Dollar Increases on Lowe’s Comments

After Deputy Governor of Australian Central Bank, Philip Lowe defended decision of higher exchange rate and savings level, the Australian Dollar went higher. According to Lowe, these decisions will help to stabilize the economy of Australia. Australian Dollar, also known as Aussie increased against Yen after the minutes of the 5th March meeting of the officials of the Reserve Bank of Australia came out.

It is being perceived that the Australian economy is showing response to the low interest rates. According to the Currency Strategist of Australia & New Zealand Banking Group Ltd., Andrew Salter, the Deputy Governor is now sounding the victory bell on the mining boom’s inflation. He added that Australia has been able to come through the boom without high level of inflation. However, he commented that a long-term short position on the Aussie is possibly not bearing any fruit at this point of time.

Aussie has increased by 0.3% against Yen and is currently priced at 99.28 Yen. Incidentally, after touching the highest level since 5th February on 15th March, Aussie is currently at $1.0386. On the other hand, the major currency of New Zealand, Kiwi declined by 0.2% and is currently priced at 82.55 US cents. Incidentally, Kiwi increased by 0.3% against Yen and is now at 78.91 Yen.

According to Lowe, Aussie has been strong and the savings rate is also high enough to help the country contain inflation and thereby allowed lower interest rates, despite the recent boom in the mining industry. Therefore, Australia has been able to digest a big investment boom without generating any sort of substantial imbalances in its economy.

Salter believes that these comments made by Lowe will be taken positively by the investors. It is expected that these comments will encourage the Australian market to continue pricing in a normalization of policy in the country. According to Salter, Reserve Bank of Australia will keep the benchmark borrowing costs at the same level in this April. As far as a recently held survey is concerned, there is 18% chance that Reserve Bank of Australia will cut down the benchmark interest rate at its meeting on 2nd April.

In the last 6 months, Aussie has increased by 2.3%, whereas, its New Zealand counterpart, Kiwi has jumped up by 3.2%. However, Kiwi tumbled on today as the Finance Minister stated that it is overvalued.

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