Australian dollar holds steady after interest rate decision
The Australian dollar (AUD) attempted to extend its gains for the fourth straight day on Wednesday, following the People’s Bank of China (PBOC) interest rate decision. The PBOC’s Monetary Policy Committee (MPC) voted to keep the benchmark interest rate unchanged at 3.1% for November.
The AUD/USD pair may face downside pressure as the US dollar (USD) strengthened on safe-haven inflows amid rising tensions in the Russia-Ukraine conflict.
According to a Reuters report late on Tuesday, Ukraine deployed US-supplied ATACMS missiles against Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov stated that the government would “do everything possible” to prevent a nuclear war from breaking out.
The Reserve Bank of Australia’s (RBA) November Meeting Minutes indicated that the central bank’s board remained cautious about the potential for inflation to continue rising, stressing the need for tight monetary policy. Board members also indicated there was no “immediate need” to adjust the cash rate, although they left the door open for future changes, noting that nothing could be ruled out.
The US dollar (USD) was steady on Wednesday after three straight days of losses, pressured by weaker-than-expected economic data released on Tuesday.
However, the greenback’s decline may be limited as investors anticipate pro-inflationary policies from the incoming Trump administration, including tax cuts and higher tariffs. These measures could boost inflation, which could persuade the Federal Reserve to slow the pace of interest rate cuts.
Source: FXStreet
