Aussie jumps after Reserve Bank of Australia abandons easing bias

PUBLISHED : Tuesday, 04 February, 2014, 1:58pm
UPDATED : Tuesday, 04 February, 2014, 1:58pm

The Australian dollar stole the limelight on Tuesday, surging over half a US cent after Australia’s central bank surprised some traders by dropping its bias towards easing rates.

The shift to a more neutral policy setting by the Reserve Bank of Australia (RBA) was announced along with a widely expected decision to keep the main cash rate unchanged at a record low of 2.5 per cent.

The RBA’s statement delivered a clear message that interest rates are now on hold, said Greg Gibbs, foreign exchange strategist for RBS in Singapore. It points to a shift from “a soft, easing bias to a clearly neutral bias”, he said.

The RBA also tweaked its wording on the Australian dollar. In its December statement, the RBA had said the aussie was “uncomfortably high”, but on Tuesday the bank only said that a lower currency will aid the economy if sustained.