AUD/USD a bit weaker after RBA embraces flexibility, but should pass – ING

The Reserve Bank of Australia (RBA) decided to go ahead as planned with tapering its bond purchases from AUD5 B to 4 B/week, seeing the economic setback as only temporary. AUD/USD drops back towards 0.7400 after spiking to 0.7470, in an initial reaction to the RBA policy decision. But the aussie is set to return to its pre-announcement rate over the course of the trading day, according to economists at ING.

Asset purchases to continue at AUD4 B per week

“Where the RBA asset purchase policy was previously going to be reviewed no later than November, having been reduced to an AUD4 B per week pace from AUD5 B at the July meeting, it is now going to be kept at AUD4 B per week until at least mid-February 2022. This is a marginal change.”

“Perhaps the most interesting bit of the RBA decision is the explanation for the changes to their policy. These included that the recovery would likely be delayed by the delta outbreak – previously, the RBA had remained fairly upbeat about the prospects for a rapid bounce-back from lockdowns.”  

“Markets have not been too fazed by this decision. The AUD initially spiked stronger on the announcement but has since shot weaker. Given how marginal this decision was in reality, we would not be surprised to see the currency revert to its pre-announcement rate over the course of the trading day.”