The Australian dollar retreated from a seven-month high after the central bank indicated it was in no rush to tighten policy but held near the 76 US-cent mark against a depressed US dollar. In its latest quarterly monetary policy statement, the Reserve Bank of Australia (RBA) said there was "no pressing need" for higher interest rates, though it added it will likely move to higher rates in this current expansion.
"Given the relaxed tone of the RBA's Statement the December rate increase we had expected is now highly unlikely," said John Edwards, chief economist at HSBC.
"We doubt a tightening will be seriously debated within the RBA much before June next year, and perhaps not even then," Edwards said. The AUD was $0.7602/07 compared with $0.7570/75 late here on Friday. It dropped to $0.7530 on Friday's strong US payrolls report before surging to $0.7633 offshore and $0.7640 in early local trade, according to Reuters data.
A steady RBA suggests the Aussie's interest rate advantage will further erode against the United States with the Federal Reserve widely expected to tighten this week, and possibly again in December after last week's payrolls data.
However, the Aussie's performance at the moment is being determined by the woes of the USD as investors fret about the widening US trade and budget deficits.
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