Tuesday, 5 February 2013

RBA Rate Cuts...will come too late ?

....Translation: We cut rates four times between May and December last year, pulling the cash rate down from 4.25 per cent to 3 per cent. That’s a hefty reduction, and there's evidence that it has boosted activity. Even though this variable rate-based economy spreads the cut fairly quickly, however, we don't think we have seen the full impact of those earlier cuts yet.........

......The currency is high mainly because rates in the developed economies overseas are at or close to zero, however. Foreign money has been pouring in, to capture our still-relatively high fixed interest rates, and to hide from the northern hemiphere’s economic carnage. Another rate cut won’t change that dynamic materially. The $A is probably high until either the northern hemisphere begins growing strongly again, pushing rates there higher, or – a much worse ‘‘solution’’ – global growth stalls, killing australia’s resources economy in the process.....(here)


....AUD/USD is down in Tuesday trading, and has dropped below the 1.04 line. Although the Reserve Bank of Australia maintained its benchmark interest rate at 3.0%, market sentiment turned against the Australian dollar as the central bank left the door open to further cuts in the near future. (here)

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