"Much of the Aussie weakness in December-January was because of the continued perception the RBA was not happy about the high currency"
- A trader at a European Bank in Singapore
On Tuesday the Reserve Bank of Australia decided to maintain the benchmark interest rate at 2.5%. After 2.25% of rate adjustment since late 2011, the RBA is now switching to a "neutral" mode, as rising home prices and stronger inflationary pressures are expected to boost growth. Such a shift in the central bank's mood was unexpected by analysts, as some prompted more rate cuts are ahead. Nonetheless, a bunch of fundamental data released Thursday is diminishing hopes of another intervention from the RBA.
The Aussie leapt as much as half a cent hitting 0.8981 against the U.S. counterpart, approaching its one-month high, bringing this week's gains to almost 2% already. Australia became a net exporter in December, as trade surplus soared to $468 from an upwardly revised surplus of $83 a month earlier, boosted by a 4% increase in exports. At the same time, imports advanced only 2%, due to a 4% jump in imported capital goods. At the same time, Australian Bureau of Statistics said retail sales picked up 0.5% on December, posting the sixth consecutive monthly gain and meeting analysts' forecasts. The last but not least, is the significant improvement in business confidence, with the corresponding gauge rising to 8 in the December quarter, compared with 3 three months earlier. This is the highest level since April 2011.
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