Following the RBA’s latest policy announcement, the Australian dollar has risen. It has aided in the return of the AUD/USD pair to the 200-day moving average of 0.7575. According to MUFG economists, the Australian dollar will experience a minor rise following the Reserve Bank of Australia’s comments.
“From September, the RBA will begin progressively tapering its quantitative easing program. The RBA stated that they were changing the weekly amount acquired in response to the stronger-than-expected economic recovery and improved outlook.”
“In November, the RBA will conduct another review, allowing the Board to respond to the current status of the economy. The RBA has made the pace of future purchases more flexible and contingent on the current strength of the economy, making the QE taper announcement more hawkish than expected.”
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The hawkish QE policy update has been largely offset by the RBA’s dovish decision to keep the key policy rate on hold until 2024, despite the hawkish QE policy update. The RBA reiterated that it will not raise the cash rate until real inflation returns to the target range of 2 to 3 percent. Along with the RBA’s yield curve control, the pledge should continue to put a damper on short-term yields in Australia. The April 2024 bond was chosen for the yield objective of 0.10 percent, in keeping with the RBA’s recent advice “”Maintained.”
“In the long run, the trends will support a stronger Australian dollar. It was already discounted as compared to short-term fundamentals like yield spreads.”/n
