Australia reduces interest rate to 5.25%. | CountingPips Forex Blog

November 4, 2008 - Forex Economic News

Australia reduces interest rate to 5.25%. Australian Dollar gains in currency trading.

The Reserve Bank of Australia lowered its interest rate by more than expected overnight, surpassing market predictions and marking the second month in a row the RBA has slashed the rate. The RBA announced that it had reduced its official cash lending rate by three quarters of a percentage point today Australia cuts interest rate from 6.00 percent to 5.25 percent. The rate cut surpassed market forecasts expecting an interest rate reduction of only half a percentage point or 50 basis points and follows a record reduction of 100 basis points on October 7th.

The 0.75 percentage point reduction brings the interest rate to its lowest point since March of 2005. The RBA, most of the year, had been especially concerned with fighting rising inflation as energy prices had skyrocketed but with a slowing Australian economy and a global credit crisis spreading, the RBA has begun easing monetary policy in anticipation of a global economic slowdown. Inflation in Australia is still registering above the RBA's target range of 2-3 percent as consumer price inflation through September was 5.00 percent.

Glenn Stevens, RBA Governor of Monetary Policy, stated in the report that, "In Australia, the overall path of economic activity appears until recently to have been close to what the Board had expected, with a needed moderation in demand occurring after a period of earlier strength. Recent reductions in borrowing rates, the depreciation of the exchange rate and the fiscal stimulus announced in October will work to assist growth in the period ahead, but deteriorating international conditions and falling commodity prices will have a dampening influence. On balance, it appears likely that spending and activity will be weaker than earlier expected."

Australian dollar gains in Currency Trading.

The Australian dollar has been gaining ground today in currency trading against most of the major currencies despite the more than expected rate announcement. The Australian dollar has advanced verses the U.S. dollar to 0.6980 AUD per USD in the US just before noon ET from the opening exchange rate of the day at approximately 0.6658. The Aussie dollar has increased verses the Japanese yen to 69.82 from today's open exchange rate of approximately 65.17 yen per aussie. The euro has declined verse the aussie to trading at 1.8576 aussie per euro after opening today at approximately 1.8881 while against the New Zealand kiwi, the aussie has gained from 1.1333 kiwi per aussie at today's open to trading at 1.1454 in the U.S. before noon.

AUD/USD Chart - The Australian dollar gains against the U.S. dollar today in currency trading despite the Reserve Bank of Australia reducing its interest rate by 75 basis points to 5.25 percent(Hourly Chart).

Today's Forex Chart

tags: interest rate, australia, aud

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