Dollar lifts as focus turns to RBA

The local unit was bouyant in late trade, as focus turned to RBA minutes and upcoming testimony.

The dollar’s focus will be on what the Reserve Bank of Australia says about house prices tomorrow.

The Australian dollar was higher in late trade on Monday ahead of a busy week that will include central bank minutes and testimony to parliament by the new central bank governor.

At 5.45pm (AEST), the Australian dollar was trading at US75.41 cents, up from US74.92 on Friday.

The focus will be on what the Reserve Bank of Australia says about house prices amid recent signs the market has gathered fresh momentum, said CBA currency strategist, Elias Haddad.

“We will be looking to see whether the RBA expresses any concerns in the minutes about the current state of the housing market,” he added.

Meanwhile, in his parliamentary testimony on Thursday, RBA Governor Philip Lowe may highlight how he will tackle Australia’s low inflation backdrop and his thoughts on recent Australian economic developments.

Earlier, Governor Lowe and Treasurer Scott Morrison announced a new monetary policy agreement, which preserved the 2 per cent to 3 per cent inflation target, but pointed to greater flexibility for policy makers around interest rate decisions.

“Both the Reserve Bank and the government agree that a flexible medium-term inflation target is the appropriate framework for achieving medium-term price stability,” the joint statement said.

“They agree that an appropriate goal is to keep consumer-price inflation between 2 per cent and 3 per cent, on average, over time,” it added.

With interest rates already at record lows, the RBA is tasked with lifting inflation over time against deflationary pressures from the global economy and stubbornly flat wages growth at home.

The RBA will need to move with some caution in cutting interest rates further as soaring property prices and record household debt could pose a risk to the nation’s banks if the surge is left unchecked.

“The new statement is simply seeking to make quite clear that below target inflation does not warrant an automatic rate cut, and that the conduct of policy is ultimately nuanced,” said Adam Boyton, chief economist at Deutsche Bank.

Dow Jones