3 Feb 2015
Asia Recap: RBA sets new record-low interest rate
FXStreet (Bali) - The Australia Dollar was the worst performer in Asian hours, following the RBA 25bp rate cut to a new record low of 2.25%, while the Yen emerged as the main winner.
The Reserve Bank of Australia decided to cut the interest rate to a new record-low of 2.25% vs 2.5% previous, being the 13th Central Bank world-wide that is forced to ease policies in order to stimulate growth and price levels, amid a global deflationary phenomenon with cheap Oil being a key driver.
On the RBA policy statement, a more dovish language was observed, noting that "at today's meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate." As per the RBA's stance on the AUD, Stevens noted: "A lower exchange rate is likely to be needed to achieve balanced growth in the economy."
The RBA statement offered very little in terms of future guidance though, leaving up for interpretation whether or not there will be further rate cuts this year. Friday's quarterly Statement on Monetary Policy (SoMP), as Westpac Economists note, "should provide new forecasts and hence a more comprehensive discussion/explanation of future prospects."
AUD/USD collapsed over 1.5 cents, setting a fresh 5 1/2 year low at 0.7650, with no bounce noted, a reflection of the current bearish sentient towards the AUD. One of the reasons could be the RBA's renewed focus to target a lower exchange rate, after it noted "AUD remains above most estimates of its fundamental value, a lower exchange rate is likely to be needed to achieve balanced growth in the economy."
USD/JPY was also a strong mover in Asia, with the Japanese Yen enjoying solid demand throughout Tokyo, as the Nikkei 225 traded on a negative note, with losses acceleration marginally sub 1% in afternoon trade. Strong selling interest in AUD/JPY fueled further bearish momentum in USD/JPY, with the rate having a brief drive through sub 117.00 levels. There continues to be solid option-related bids circa 117.00 being reported, with a $848 mln in vanilla expiries. Besides, importers and investors are also reported to be good buyers sub round level.
Main headlines in Asia
Oil bounce material from a technical perspective - Westpac
RBNZ: Probability of further hikes substantially greater than cuts - BNZ
Japan Monetary Base (YoY) came in at 37.4% below forecasts (40.1%) in January
New Zealand ANZ Commodity Price rose from previous -4.4% to -0.9% in January
Australia's trade deficit shrinks in December
RBA cuts rate to a new record low of 2.25%
Are there further RBA cuts in store?
Nikkei sinks to weekly lows after RBA decision
The Reserve Bank of Australia decided to cut the interest rate to a new record-low of 2.25% vs 2.5% previous, being the 13th Central Bank world-wide that is forced to ease policies in order to stimulate growth and price levels, amid a global deflationary phenomenon with cheap Oil being a key driver.
On the RBA policy statement, a more dovish language was observed, noting that "at today's meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate." As per the RBA's stance on the AUD, Stevens noted: "A lower exchange rate is likely to be needed to achieve balanced growth in the economy."
The RBA statement offered very little in terms of future guidance though, leaving up for interpretation whether or not there will be further rate cuts this year. Friday's quarterly Statement on Monetary Policy (SoMP), as Westpac Economists note, "should provide new forecasts and hence a more comprehensive discussion/explanation of future prospects."
AUD/USD collapsed over 1.5 cents, setting a fresh 5 1/2 year low at 0.7650, with no bounce noted, a reflection of the current bearish sentient towards the AUD. One of the reasons could be the RBA's renewed focus to target a lower exchange rate, after it noted "AUD remains above most estimates of its fundamental value, a lower exchange rate is likely to be needed to achieve balanced growth in the economy."
USD/JPY was also a strong mover in Asia, with the Japanese Yen enjoying solid demand throughout Tokyo, as the Nikkei 225 traded on a negative note, with losses acceleration marginally sub 1% in afternoon trade. Strong selling interest in AUD/JPY fueled further bearish momentum in USD/JPY, with the rate having a brief drive through sub 117.00 levels. There continues to be solid option-related bids circa 117.00 being reported, with a $848 mln in vanilla expiries. Besides, importers and investors are also reported to be good buyers sub round level.
Main headlines in Asia
Oil bounce material from a technical perspective - Westpac
RBNZ: Probability of further hikes substantially greater than cuts - BNZ
Japan Monetary Base (YoY) came in at 37.4% below forecasts (40.1%) in January
New Zealand ANZ Commodity Price rose from previous -4.4% to -0.9% in January
Australia's trade deficit shrinks in December
RBA cuts rate to a new record low of 2.25%
Are there further RBA cuts in store?
Nikkei sinks to weekly lows after RBA decision