"Given the substantial degree of policy stimulus that had been imparted, it was prudent to hold the cash rate steady while continuing to gauge the effects, but not to close off the possibility of reducing it further should that be appropriate"
- The Reserve Bank of Australia
The Australian Dollar advanced on Tuesday, albeit these gains were limited, as highly-anticipated FOMC minutes weighed on pair's performance more than RBA comments. The Aussie inched higher to 0.9412 against the greenback, reaching the highest level since November 8, as Australian policymakers claimed that earlier interest-rate adjustments are spreading through the economy, even as they do not exclude the possibility of further easing, as the Aussie remains at the uncomfortably high level. The RBA led by Glenn Stevens has reduced borrowing costs by 2.25% during the last two years to boost employment-intensive parts of the resource-rich economy, as investment in mining sector begins to wane. While housing market could become another key driver for the economy, manufacturing sector is struggling to develop amid overvalued currency.
The central bank expects growth to be subdued this year, with economy expanding just 2.5%, and moreover, it is unlikely to pick up to above-trend levels until 2015. And once again, one of the main reasons for such a sluggish performance is strong domestic currency. A significant drop in the Aussie would help to alleviate some of the pressure from trade sector and would lead to increased production over relatively cheap imports, making products more competitive globally.
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