- The earnings of the Australian dollar remain limited below 96.65 and maintains an immediate bearish trend at stake.
- The Yen remains defensive, weighed by a lower demand for shelter assets after the agreement between the US and Japan.
- The Dovish acts of the RBA and the weak Australian data are acting as winds against the Aud.
The Australian dollar is one of the best performances in a risk aversion session on Wednesday and is being negotiated in front of the Japanese Yen, which is an active refuge. However, the immediate trend of the aud/JPy is still bassist, in a lower sequence of maximums since it reached a peak of 97.45 last week, and with the limited bulls below 96.60 until now today.
Aussie shot together with other risk -sensitive assets during Wednesday’s Asian and European negotiation sessions, after the announcement of US President Trump on a commercial agreement with Japan. This agreement has contributed to relieve investors’ fears on the uncertain perspective of global trade and has increased the hopes of more agreements of this type before the deadline of August 1.
The Yen recovers after the denial of Prime Minister ishiba on rumors of resignation
The Japanese Yen received some support in the early European session, since Japan’s prime minister, Ishiba, spoke to deny rumors spread by local media, suggesting that he could give up at the end of August. Ishiba’s comments have contributed to relieve concerns about political uncertainty and have provided some support for the JPY.
In Australia, the minutes of the July 7-8 meeting revealed that some members of the Committee voted in favor of a rate cut of 25 basic points, which increased the expectations of the market that the bank could further make its monetary policy be more flexible after the August meeting, and increased the negative pressure on the torque.
On Wednesday, the Westpac Leading index in Australia failed to provide significant support for AUNSIE. The index fell to 0.03% in June from 0.1% of the previous month. These levels point to weak economic growth that adds reasons for the RBA to continue cutting rates next month.
RBA – Frequently Questions
The Bank of the Australian Reserve (RBA) sets interest rates and manages Australia’s monetary policy. The decisions are made by a advice of governors in 11 meetings per year and in the necessary emergency meetings that are necessary. The main mandate of the RBA is to maintain price stability, which means an inflation rate of 2%-3%, but also “… contribute to the stability of currency, full employment and economic prosperity and the well-being of the Australian people.” Its main tool to achieve this is to raise or lower interest rates. Relatively high interest rates will strengthen the Australian dollar (AUD) and vice versa. Other RBA tools are the quantitative relaxation and hardening of monetary policy.
Although traditionally it has always been considered that inflation is a negative factor for currencies, since it reduces the value of money in general, the truth is that in modern times the opposite has happened with the relaxation of cross -border capital controls. Moderately high inflation now tends to take the central banks to raise their interest rates, which in turn has the effect of attracting more capital of world investors who are looking for a lucrative place to keep their money. This increases the demand for the local currency, which in the case of Australia is the Australian dollar.
Macroeconomic data calibrates the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in safe and growing economies than in precarious and contraction economies. A greater influx of capital increases aggregate demand and the value of the national currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment and surveys about consumer feeling can influence the AUD. A strong economy can encourage the Bank of the Australian Reserve to raise interest rates, also supporting the Aud.
The quantitative easing (QE) is a tool used in extreme situations in which to lower interest rates is not enough to restore credit flow in the economy. The QE is the process by which the Bank of the Australian Reserve (RBA) prints Australian dollars (AUD) in order to buy assets – normally State or business bonds – to financial institutions, thus providing them with the liquidity they need so much. The one usually translates into a weaker audience.
The quantitative hardening (QT) is the reverse of the QE. It is carried out after the QE, when economic recovery is underway and inflation begins to increase. While in the QE the Bank of the Australian Reserve (RBA) buys state and business bonds from financial institutions to provide liquidity, in QT the RBA stops buying more active and stops reinvesting the main one that expires of the bonds it already has. It would be positive (or bullish) for the Australian dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
