Awaiting RBA Minutes

AUD: HOLDING STEADY AHEAD OF RBA MINUTES
Of all the major currencies, the commodity currencies held up the best against the dollar. The Australian and New Zealand dollars ended the day unchanged while the CAD recovered a small part of Friday’s losses. After a sharp sell-off in gold and oil at the end of last week, commodity prices stabilized. Having risen sharply over the past year thanks to strong demand from Asia and a weaker dollar, increases in commodity prices have boosted Australia’s terms of trade to historical highs. Unfortunately, the latest news that China is facing the strongest price increases in years has officials looking to curb inflation and possibly limit China’s growth. This has many Australians worried because China is Australia’s primary export partner and the Australian mining giant is heavily dependent on China to support the purchases of basic and precious metals. As investors are well aware, RBA surprisingly raised rates to 4.75 percent recently amidst fears that the Australian economy is expanding faster than anticipated. Immediately following the decision, Australia was faced with a number of economic reports that made many second-guess the RBA’s decision. Just last week we saw disappointing employment figures coming out of the region and a 0.4% rise in the Unemployment Rate. Nevertheless, RBA Governor Glenn Stevens remains hopeful for Australia’s future. Tonight investors can expect to see the minutes from the last monetary policy meeting which should give the RBA a better idea of where the central bank stands on future monetary policy.

Commentary by Kathy Lien