RBA keeps an eye on Aussie dollar and mining investment
(20 June 2013 – Australia) Although the Australian dollar had "depreciated noticeably" since the May cash rate cut, the Reserve Bank of Australia (RBA) indicated it is open to cutting the cash rate again.
In its June board minutes, published on Tuesday, the RBA said the dollar ''remained at a high level considering the decline in export prices that had taken place over the past year-and-a-half''.
''It was possible that the exchange rate would depreciate further over time as the terms of trade declined, which would help to foster a rebalancing of growth in the economy.''
The Reserve Bank said while the United States dollar was an ''important contributor'' to the Australian currency's recent depreciation, it also fell against most of its peers. It said this was a reflection of its May cut, falling commodity prices and concerns about China's economy.
The board members noted that lower interest rates were having an effect on the economy, but that wage growth and business conditions remained subdued.
They said there was ''considerable uncertainty'' about mining investment after it peaks and plateaus at a high level over the next year.
Financial markets were pricing in a 23 percent chance of a July rate cut, according to a source. They were also pricing in at least one more cut by the end of the year.