Tuesday saw the Australian dollar drop against all of its counterparts following the decision of the Reserve Bank of Australia to leave borrowing costs unchanged, Bloomberg reports.
But the central bank did not rule out future interest rate slashes, which tempered the performance of the Aussie. The monetary unit initially gained against many of its rivals early in the trading session but the losses set in after policy makers’ decision.
“The more dovish than expected RBA statement supports our view that it will likely continue to lower its target rate towards 2.5 percent in 2013 which will have only a modest weakening impact on the Australian dollar yields will still be relatively high in Australia,” according to Bank of Tokyo-Mitsubishi analysts, as cited by The Financial Times.
A senior currency strategist with the Royal Bank of Canada told Bloomberg that the RBA is likely to cut interest rates during the second quarter of this year.
Policy makers with the RBA said the exchange rate of the Australian dollar also appears to be too high, according to Bloomberg.
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