"The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet."
-Glenn Stevens, RBA Governor
The Australian Dollar soared to its highest level against the greenback since September amid sings the Reserve Bank of Australia will postpone its decision to cut the benchmark interest rate any further. Many of Australian economists have lowered their forecasts of another rate cut, with the key refinancing rate currently holding at historic low of 2.5%, and mentioned the economy is showing signs of improvement. While UBS economists are considering the easing cycle is over, both Westpac and National Bank of Australia said another 0.25% rate cut will be delayed until February 2014, compared with November expected earlier. Furthermore, Westpac expects AUD/USD to hit 0.95 by the end of the year, from 0.92 expected previously. However, they all agreed that households' savings are already flowing from saving accounts and mortgage repayments to some riskier investment, such as real estate, suggesting investors' confidence in on the rise.
Earlier this month, the RBA already claimed the current policy remains appropriate and saying they will remain in the "wait-and-see" mode looking for the effect of previous rate cuts. Under Tony Abbott's leadership the economy is likely to be rebalanced from waning mining investment, as the government has already pledged to implement structural reforms, while growing demand for commodities will provide an additional boost to the resource-reach economy.
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