Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Australian dlr retreats as RBA reaffirms easy policy, ramps up bond buying

Published 02/03/2021, 03:56 pm
Updated 02/03/2021, 04:00 pm
© Reuters.

© Reuters.

By Paulina Duran

SYDNEY, March 2 (Reuters) - The Australian dollar eased on Tuesday as the central bank sought to calm nervous bond markets by recommitting a pledge to keep buying bonds, and reassuring that faster growth will not lead to an early tightening cycle.

The Aussie was 0.12% lower $0.7760 AUD= at midday on Tuesday, and down 3% from the $0.8007 three-year high it reached last week, after the Reserve Bank of Australia (RBA) left interest rates at historic lows of 01% at its monthly policy meeting.

"The current monetary policy settings are continuing to help the economy by keeping financing costs very low, contributing to a lower exchange rate than otherwise, and supporting the supply of credit and household and business balance sheets," the RBA said in its statement.

" It remains committed to maintaining highly supportive monetary conditions until its goals are achieved...(and) will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range."

Australian 10-year bond AU10YT=RR yields, which had spiked to a high of 1.97% on Friday on bets of rate hikes as early as next year before pulling back on Monday, were two basis points higher at 1.69%. on 3-year bonds YTTc1 were steady at 99.725 while 10-year bond futures YTCc1 were two ticks lower to 98.31.

Last week's dramatic selloff in bonds, which sent three-year yields AU3YT=RR as high as 0.188% and threatened to shakeup the RBA's target of 0.1%, prompted an aggressive response from the central bank. It made a A$3 billion ($2.33 billion) bond buying offer last Friday, and followed up with another A$4 billion in Monday. economic conditions have improved in Australia, helped by a more successful response against the COVID-19 pandemic compared to its peers overseas, policymakers worry the speed of yield rises could derail the recovery.

"The Bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary," said RBA Governor Philip Lowe.

In New Zealand, which has also successfully controlled the spread of coronavirus in a boost to its economy, authorities have been forced to calm market nerves about policy intentions.

The kiwi dollar was also 0.18% lower at $0.7250 NZD= after New Zealand's central bank said it was in no rush to tighten monetary policy in an attempt to temper market speculation it might move to tighten interest rates sooner than expected. on NZ 10-year bonds NZ10YT=RR were little changed on the day at 1.77%. That is off from its Friday peak of 2.04% and far above the 1.01% held at the start of this year. (Editing by Shri Navaratnam)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.