Australian Dollar takes a Hit as RBA Speak Dampens a Rate Hike

The Australian dollar, specifically the AUD/USD Forex market took a beating this morning. Reserve Bank of Australia Deputy Governor Guy Debelle, speaking at a conference, pushed back against investors’ expectations that local interest rates could rise.

In Adelaide, this morning, Debelle said Australian rates do not have to go up as with those of the RBA’s western central bank peers. He also said that recent RBA talk about the “neutral” monetary policy rate for Australia was “not significant.”

His comments come as AUD/USD is trading near a two year high. Some of that strength has been down to the most recent monetary policy meeting minutes. There was talk of a 3.5 percent neutral official cash rate. This had some investors wondering whether the record-low, 1.50 percent OCR might be going up sooner than markets expect.

Australian Dollar reacts Sharply to Comments

Australian deputy bank Governor Debelle seems to have clamped down hard on rate hike expectations. There was a predictable response for AUD/USD. This Forex market retreated further from the psychologically important 0.80 pivot level during his speech. The RBA is well known to about not being happy about it’s a strong local currency. Especially its effect on inflation and the Australian economy’s transition away from being reliant on raw-material exports. Debelle feels that the financial markets got carried away this week with their hopes of an interest rate hike.

The RBA is not very likely to do much as the US Dollar is under broad selling pressure.

The island nation’s local economic data has improved solidly, as of late. This week’s strong employment report was the latest good news.