Australian Dollar Falls as Dovishness Creeps Into RBA Commentary
By James Glynn
SYDNEY--The Australian dollar weakened after the Reserve Bank of Australia announced a fifth interest rate increase as traders detected a hint of dovishness creeping into the central bank's commentary.
The decision to raise the official cash rate to an 18-year high of 4.85% from 4.60% Tuesday was widely expected, but the bank's monetary policy board only voted six to three in favor of the move.
The Australian dollar initially picked up after the decision to trade just above 70.00 U.S. cents before falling back to around 69.75 U.S. cents as signs of the RBA's dovishness were parsed. The 10-year government bond yield fell after the announcement, dropping to around 5.10% from 5.16% prior to the decision.
Sean Callow, senior Market Analyst at ITC Markets, said the selling likely reflected the shape of the board's vote.
There was a dovish tinge to the RBA's commentary, said Dwyfor Evans, head of APAC macro strategy at State Street Markets. The bank appears more focused on slowing output growth, which could be a potential trigger to disinflation.
"Real money investors have started to sell the Australian dolla...