The AUD Has Spiked On Reserve Bank Comments That Its Policy Is Right, For Now

The Australian dollar jumped to $US0.9166 immediately after the Reserve Bank released the minutes of its July monetary policy meeting this morning.

Forex traders speculated that the RBA’s comments made an August interest rate cut less likely.

Here’s happened to the exchange rate, via

And here’s what the RBA said:

The most significant change had been the depreciation of the exchange rate, though members noted that it remained at a high level. The depreciation was expected to add a little to inflation over time, but the forecast was for inflation to remain consistent with the target.

Members noted that it was possible that the exchange rate would depreciate further over time as the terms of trade and mining investment declined, which would help to foster a rebalancing of growth in the economy.

Given the exchange rate adjustment that was occurring, and with the substantial degree of monetary stimulus already in place, members assessed the current stance of policy to be appropriate for the time being.

The Board also judged that the inflation outlook, although slightly higher because of the exchange rate depreciation, could still provide some scope for further easing, should that be required to support demand.

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