The Australian dollar rose the most since June, climbing from near a six-year low against the dollar, after the Reserve Bank held interest rates and omitted any reference to further currency declines being necessary.
The Aussie strengthened versus all of its 16 major counterparts after trade and retail-sales data, released before the policy decision, were better than economists predicted. New Zealand’s dollar rose ahead of an auction for whole milk powder. Strategists including Lee Hardman at Bank of Tokyo-Mitsubishi UFJ said these moves higher may prove short-lived. The weakness in commodity prices will still weigh on the Aussie and kiwi against the dollar, he said.
“The RBA has been trying to talk the Australian dollar lower for some time now and they have softened that stance in today’s policy statement,” said Hardman, a London-based currency strategist at the bank. “That has triggered a relief rally in the near term, but our view is that that’s unlikely to be sustainable.”
Australia’s dollar jumped 1.6 percent, its biggest daily increase since June 2, to 74.01 U.S. cents as of 7:43 a.m. in New York, compared with 72.35 cents on July 31, its lowest since 2009. New Zealand’s kiwi rose 0.7 percent to 66.06 U.S. cents. It dropped to a six-year low of 64.99 cents on July 16. Canada’s currency strengthened 0.2 percent to C$1.3128 per dollar, after depreciating to C$1.3177, the weakest since 2004.
A rebound in oil prices on Tuesday supported raw materials prices and commodities currencies. The Bloomberg Commodity Index climbed 0.9 percent, its first rise in four days. The krone of Norway, an oil exporter, advanced 0.5 percent to 8.2168 per dollar.
Reserve Bank of Australia Governor Glenn Stevens and his board kept the cash rate at a record-low 2 percent, as predicted by markets and economists following reductions in May and February. The Aussie is down more than 30 percent since a peak in 2011 versus the dollar.
Bank of Tokyo-Mitsubishi’s Hardman said the weakness in commodity prices “is still the key driver.” He added that “whether the RBA has softened their verbal intervention, I don’t think in the grand scheme of things makes a difference.”
The Aussie, kiwi and Canadian dollar have all declined against their U.S. peer this year as a gauge of commodity prices plunged to a 13-year low.
After its previous meeting in July, the RBA had said of the currency that “further depreciation seems likely and necessary.” Tuesday’s statement was the first since early 2014 that didn’t refer to the Aussie as high or needing to fall further.
Kit Juckes, a London-based strategist at Societe Generale SA wrote in a note to clients that the Aussie’s downtrend against the dollar isn’t over, “with Fed/RBA policy set to diverge further in the months ahead, and with the AUD still vulnerable to adverse shocks from the Chinese economy or from global commodity markets.”
The Fed is widely forecast to be the first major central bank to tighten monetary policy this year, with markets pricing in about a 67 percent chance of an interest rate increase in 2015.