15.08.2022
Chicago 12, Melborne City, USA
Business

Australian Dollar Remain Largely Unmoved After Higher-than-Expected RBA Rate Hike

The Australian dollar recorded a mild uptick in the London session on Tuesday following comments from Reserve Bank of Australia (RBA) Governor Philip Lowe hinted at more rate hikes. However, persisting fears of a crawling global growth and worsening inflation limited gains for the Aussie.

Currency investors remain doggedly focused on central bank statements and activities and the implementation of aggressive internet rate hikes.

The Aussie traded 0.34% higher against the dollar on Tuesday, bouncing from yesterday’s midday decline, after Lowe signaled more policy tightening in the medium-term. RBA minutes from its June meeting, which showed that the bank increased rates by a higher than expected 50 basis points (bps), underlined the bank’s worry over inflation.

Australian Dollar Long-Term Trajectory Under the Control of Global Economic Growth

Analysts argue that the long-term trajectory of the Australian dollar will be determined mainly by the global economic growth outlook, which does not look encouraging for the single currency.

Commenting on the long-term trajectory driver of the Aussie, Carol Kong, an FX strategist at Commonwealth Bank of Australia, noted:

“I think the bigger driver for the Aussie will be global factors rather than local influences, and we are now forecasting the US dollar to increase this year based on our expectation for a sharp slowdown. We think the Aussie will push to 65 US cents by the end of this year. ”

In other news, the Japanese yen continued to exhibit significant weakness as it refreshed a 24-year low against the dollar after the USD / JPY pair tapped the 135.50 top this morning. The pair hit the 24-year high of 135.60 last Tuesday after the Bank of Japan (BoJ) dashed hopes of a change in policy stance and reaffirmed its commitment to maintaining an ultra-loose monetary policy.

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