Resolved Question
Why did the AUD fall after the RBA's rate decision came out?
the rate is now 3.5, shouldnt it be good for the AUD?
over 2 years ago
Best Answer - Chosen by Voters
To add to what everyone else already mentioned... Maybe traders were also dismayed to find out that the RBA isn't likely to hike rates in December. Parts of the actual statement from the RBA hinted that the central bank would pause from raising rates next month. To quote: "With the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker." This shows that they believed that it would be best to implement their exit strategies at a more gradual pace and, knowing that the RBA has never hiked rates three months in a row, maybe they won't do so in December. The statement went on to say that RBA officials think that the rate hikes in October and November are sufficient to sustain economic growth and keep inflation within target.
over 2 years ago
Answers (5)
Yes, it "should" be good... However, unlike the previous rate decision, the 25 basis point hike to 3.5% was already expected by traders and has been priced in prior the announcement. Everyone saw it coming so it is possible that currency traders just unwound there AUD/USD longs quickly after.
over 2 years ago
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The AUD fell across the board despite the RBA's 0.25% hike in its interest rate because market participants have been anticipating the move already. In their language, they "sold on news." "Sell on news" is the practice of selling(buying) a currency or other investment after the news is received. The rationale behind this is that the news has already been priced into the currency. If you check the AUDUSD and AUDJPY's hourly price actions, you'll notice that hey have been moving up already several hours before the time of the announcement.
over 2 years ago
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"Buy the rumor, sell the news".
Th AUD was bought up in anticipation but was sold after official new releases as traders liquidated their positions.
over 2 years ago
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The fact that we pretty much knew the RBA would be raising rates is only one part of why the AUD fell after the announcement.The second part is expectations. Traders are going to look at the RBA statement as well to get an idea of expectations for future rate increases. In this case, the RBA statement indicated they may pause on further rate increases. That is negative.
over 2 years ago
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There can be as many reason to why as there are people willing to comment. There are gobs of possibilites for rationale. Best advice care only about what price thinks and says. Example, how many people reasoned why oil would go to $200 over a year ago and kept buying on those rationalizations will it dropped into the $30 range- they did the same thing on the way up for why it could not break 70, 90, 100 and it did.Listen to price, in the end it wins.
over 2 years ago
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