Australian dollar gains as policy left unchanged
Interest rates remain at record low after 2 years of cuts, as Australian property prices keep rising
Reserve Bank of Australia governor Glenn Stevens omitted any mention of having scope for further monetary easing for the third policy meeting in a row. Traders are taking that as approval to drive the local currency higher.
Stevens reiterated that further declines in a currency that has slumped 9.9 per cent this year would assist growth, while flagging that previous rate cuts are supporting parts of the economy.
"They do want a weaker currency, but they acknowledge that there's little they can do about that at this stage if they don't think they need to cut rates anymore," said David Forrester, a senior vice-president for Group of 10 currency strategy at Macquarie Bank in Singapore.
"The market will now begin to price in that the RBA is done and start to price in rate hikes next year."
The RBA decision came after data showed home prices surged to a record, manufacturing rose for the first time in two years and retail sales beat forecasts. Sentiment among businesses and households is strengthening as the impact of 2.25 percentage points of rate cuts over two years filters through the economy, Stevens said on Tuesday.