The Reserve Bank of Australia left the interest rate unchanged at 2.75%, as widely expected, and maintained a dovish bias, explicitly mentioning the exchange rate.
AUD/USD reacted with a drop from around 0.9230 to 0.9151 before recovering and attempting to recapture the 0.92 line. Is the road now open to 0.90?
Here is the key part from the statement, emphasis mine:
The Australian dollar has depreciated by around 10 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.
And here is the open door for more easing:
The Board also judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand.
The high exchange rate of the Aussie was one of the reasons for the rate cut back in May, that started the big crash of the Aussie. It seems that the RBA would like to see the Aussie continue falling, in order to aid the economy.
Forecasts regarding Chinese growth and the future of the Australian dollar have all been negative lately, with one “bold†forecast even suggesting a drop to 0.60. In any case, the less bold target of 0.90 is not that far. It seems that a few positive figures from the US can send AUD/USD to this round number.
For more, see the Australian dollar forecast, and here is a live chart of the pair:
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