PERTH: The Australian dollar is weaker after the Reserve Bank signalled it could cut interest rates again, sparking an abrupt spike and dive in the currency.
The unit was worth US78.91c at 12.00pm (AEST) on Friday, down from US79.67c on Thursday.
The currency actually spiked, after the central bank’s statement on monetary policy was released in late morning trade, jumping from US78.95c to US79.28c.
But within minutes, it abruptly fell, hitting a three-day low of US78.72c soon after.
Westpac senior currency strategist Sean Callow said the Australian dollar initially spiked because traders read the statement as a neutral stance on interest rates, following this week’s interest rate cut which took the cash rate to a new record low of two per cent.
“For people trading Australian dollar, they bought it because there’s no overt easing basis,” he said.But the Australian dollar fell again very soon as the Reserve Bank’s gloomy tone about slower economic growth and a weak labour market convinced traders another rate cut was possible.
“It just gives the faintest of impressions that … maybe there’s room for just one more for the road,” Mr Callow said.
The Reserve Bank said “the board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time”.
