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THE TAKEAWAY: After experiencing losses overnight in U.S. trading, the Australian Dollar recovered slightly, then lost ground again as the RBA released the minutes from their April meeting.
The Australian Dollar fell sharply in Asian trade yesterday as Chinese GDP growth came in less than expected. These losses continued throughout the evening in European and then U.S. trading as investors started to lose confidence in the Australian economy that depends largely on trade with China. Losses in gold late in last week continued into this week which saw Australian gold stocks experience large losses, and could have contributed to the so called ‘Aussie’ weakness as traders dumped Australian denominated assets. As Asian trading opened on Tuesday, the currency recovered from below 1.031 to above 1.034 ahead of the RBA minutes being released.
The currency weakened again, as the RBA announced similarly to previous minutes, that the inflation outlook allowed room for rate cuts. Risks on the downside were seen by the Central Bank as being a slowdown in mining investment as well as the high Australian Dollar which meant that the RBA saw the current accommodative policy stance as appropriate. Investors in the Australian currency sold some of their holdings which saw the Aussie hold around 1.033 as the RBA reinforced that the economy was reacting to rate cuts.
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