Australia reduces interest rate to 6.0%. Aussie dollar falls in currency trading. | CountingPips Forex Blog

October 7, 2008 - Forex Economic News

Australia reduces interest rate to 6.0%. Aussie dollar falls in currency trading.

The Reserve Bank of Australia lowered its interest rate by the most since 1992, surpassing market predictions and helping propel the Australian dollar lower in currency trading today. The RBA announced that it had reduced its official cash lending rate by a full percentage point today from 7.00 percent to 6.00 percent. The rate cut surpassed market forecasts expecting an interest rate reduction of only half a percentage point or 50 basis points and Aud falls in currency trading today. follows a reduction of 25 basis points in September.

The percentage point reduction is the largest rate cut since May of 1992 when the RBA also reduced by 1.0 percent and brings the interest rate to its lowest point since August 2006. 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.

Glenn Stevens, RBA Governor of Monetary Policy, stated in the report that, "The recent deterioration in prospects for global growth, together with much more difficult market conditions even for creditworthy borrowers, now present the risk that demand and output could be significantly weaker than earlier expected. Should that occur, inflation would most likely fall faster than earlier forecast" and "Given that background, the Board judged that a material change to the balance of risks surrounding the outlook had occurred, requiring a significantly less restrictive stance of monetary policy."

Australian dollar declines in Currency Trading.

The Australian dollar has been losing ground today in currency trading against most of the major currencies after making some initial gains following the rate announcement. The Australian dollar has declined verses the U.S. dollar to 0.7182 AUD per USD in the US afternoon from the opening exchange rate of the day at approximately 0.7220. The Aussie dollar has declined today verses the Japanese yen to 73.34 from today's open exchange rate of 74.17 yen per aussie. The euro has gained verse the aussie to trading at 1.8947 aussie per euro after opening today at approximately 1.8806 while against the New Zealand kiwi, the aussie has declined from 1.1417 kiwi per aussie at today's open to trading at 1.1367 in the U.S. afternoon.

AUD/USD Chart - The Australian dollar falls against the U.S. dollar today in currency trading after the Reserve Bank of Australia reduced its interest rate by a full percentage point to 6.0 percent(Daily Chart).

Today's Forex Chart

tags: australia, interest rate, aud, currency trading

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