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Jun 18 - 10:55 AM

MUFG: RBA's June Meeting Provides Near-Term Support for AUD

By eFXdata  —  Jun 18 - 09:35 AM


The Reserve Bank of Australia's (RBA) recent policy meeting has modestly strengthened the Australian dollar, with the AUD/USD and AUD/NZD rates reaching intra-day highs. Despite acknowledging economic weaknesses, the RBA's cautious stance on future rate hikes has provided near-term support for the currency.

Key Points:

  1. AUD Strengthening Post-Meeting:

    • The Australian dollar saw modest gains following the RBA's policy meeting, with AUD/USD and AUD/NZD rates peaking at 0.6632 and 1.0834, respectively.
  2. Inflation and Policy Uncertainty:

    • The RBA noted that while inflation is easing, it remains high and is slowing more gradually than expected.
    • The central bank is uncertain about the interest rate path needed to bring inflation to target within a reasonable timeframe, leaving all options open.
  3. Economic Downside Risks:

    • The decision not to hike rates further was influenced by signs of weak economic momentum, including slow GDP growth, a rising unemployment rate, and slower wage growth.
  4. Market Expectations and RBA Outlook:

    • Despite the RBA's tough talk on potential future rate hikes, the market is less convinced, expecting the next policy move to be a rate cut later this year.
    • MUFG shares this view but acknowledges that the RBA could still tighten policy further, alongside the Bank of Japan, which could support the AUD.


The RBA's latest policy meeting has provided near-term support for the Australian dollar, despite highlighting economic weaknesses and uncertainties in the inflation outlook. Market participants remain skeptical about further rate hikes, anticipating a potential rate cut later this year. However, the possibility of the RBA tightening policy further, along with a favorable global economic outlook, could continue to bolster the AUD.

MUFG Research/Market Commentary


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