SINGAPORE, Nov 2 (Reuters) – Australia’s central bank left its key rate at a record low of 0.1% on Tuesday, but abandoned both its pledge to keep bond yields low and its projection of no increase interest rates until 2024.
The three-year bond yields that the Reserve Bank of Australia (RBA) had targeted so far first fell, then rose about 3 basis points to 0.758%, while benchmark yields at 3 years fell 5 basis points to 0.99%.
Shares fell and the Australian dollar fell 0.25% to $ 0.74975, but remained within a two-week range.
RAY ATTRILL, HEAD OF FX STRATEGY, NATIONAL BANK OF AUSTRALIA, SYDNEY:
“The RBA has done everything possible to appear conciliatory.
“There is nothing in the statement to endorse market prices that move the RBA into 2022, so in that sense there is clearly an attempt to push market prices back.
“Their forecast, which we get on Friday, might be consistent with a move in 2023, but definitely not in 2022, and I think that’s where the market reaction is coming from.
“Over the past week or so, there has been a standoff between the sharp drops we’ve seen in commodity prices – especially for coal and iron ore futures – and the big moves we have seen in Australian interest rates, especially real interest rates. Arguably now, this tug-of-war for the moment is being resolved with both lower rates and a cut commodity prices, so on that basis I would say the risk is that we will see the Australian dollar slip again in the near term. ”
“I don’t think the Aussie is going to take a huge amount of damage here, but for now you benefit from both commodity prices and rising interest rate control, so the way to go. short term least resistance is expected to be on the decline. (Reporting by Kevin Buckland and Hideyuki Sano in Tokyo, Tom Westbrook in Singapore, Alun John in Hong Kong Compiled by Vidya Ranganathan Editing by Shri Navaratnam)