RBA: Yield target successfully reinforced the bank's forward guidance about the cash rate

Anil Panchal FXStreet

“Now that the board has more experience with bond purchase programs, it is likely that, in the future, bond purchases would be preferred to a bond yield target,” said the Reserve Bank of Australia (RBA) during its review of yield target.

Additional comments

Any use of a yield target would require close attention to the lessons learned from this experience.

Yield target successfully reinforced the bank's forward guidance about the cash rate.

But its effectiveness as a monetary policy tool waned as market participants reassessed their views of the outlook for the cash rate.

While a bond purchase program offers more flexibility than a yield target, it carries other risks.

Exit experience caused some reputational damage to the bank.

Board has agreed to strengthen the way it considers the full range of scenarios when making policy decisions.

AUD/USD grinds higher

Following the RBA announcement, AUD/USD holds onto the week-start recovery moves, picking up bids to 0.6955 by the press time of early Tuesday morning in Asia.

Also read: AUD/USD hovers around 0.6950s after failures at 0.7000 ahead of RBA Lowe

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.