"We are of the view that rising house price inflation and the recent spark in credit growth prevents entertaining another cash rate cut."
- Annette Beacher, TD Securities head of Asia-Pacific research
The Australian Dollar plunged 0.35% versus its U.S. counterpart, hitting the lowest level since the beginning of September after the Australian central bank signalled the currency is still "uncomfortably high", meaning more rate cuts are possible. The RBA, however, refrained from additional measures this month and left the overnight cash-rate at 2.5%, thus meeting analysts' expectations. Following last month's comments Glenn Stevens reiterated his concern over the strong Aussie, and stressed that a weaker currency is needed to achieve balanced growth in the domestic economy. Meanwhile, analysts believe the RBA will not make any adjustments to the monetary policy next year in order to avoid emergence of a growth gap, as companies in the mining sector plan fewer projects. Additionally, low borrowing costs are propelling demand for property, hence, driving up home prices, also supporting the case the RBA may be reluctant to add to its 2.25% rate cut since late 2011.
The Aussie plummeted almost 15% since early April and 4.6% since October's RBA's policy meeting; nonetheless, from a long term-perspective, its value still remains elevated, adding more pressure on the central bank, as the economy is suffering from waning investment in the key mining sector.
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