Australian Dollar Higher as Rates on Hold, Growth Close to Trend

The Australian Dollar rallied after the RBA decided to keep rates on hold at 3.00 per cent citing 2012 domestic growth being close to trend, as well as lessened global risks.

THE TAKEAWAY: The Australian Dollar rallied after the RBA decided to keep rates on hold at 3.00 per cent citing 2012 domestic growth being close to trend, as well as lessened global risks.

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The Reserve Bank of Australia has kept the cash rate at 3.00 per cent which was in line with market expectations. The Australian Dollar rallied, as the statement by Governor Glenn Stevens mentioned stabilizing Chinese growth as well as reduced downside risks seen globally.

The statement released by the Reserve Bank outlined improvements in both the American and European economies, as well as reiterating the significant easing that took place in 2012 which is still due to become more apparent. Stevens did warn however, that given the slight softening of the labor market, unemployment edging higher, and growth due to be just below trend this coming year, the RBA would take an accommodative stance of monetary policy. Finally, given the inflation outlook as at present, the Reserve Bank affords scope to ease policy further.

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