If interest rate is cut today by RBA , what will be the effect on the Australian dollar exchange rate?
The Reserve Bank of Australia (RBA) is tipped to lower interest rates today. What effect will that have on the AUD exchange rate? .. Eg AUD/USD
- Anonymous9 years agoFavorite Answer
It will be devalued or depreciated against the dollar. But it might be hard because the fund rate in the US is and will be near zero until 2014.But it will be against the Euro.
- T_TLv 49 years ago
There are overseas investors who borrow money from their countries at very low repayments and put the sum into an Australian bank which pays high interest. Eventually they take it out and make a profit.
Lowering interest rates means that profitability for those people would decrease so there would be fewer people carrying out this type if investment. Demand for AUD is lower and price falls.
You can also see it as overseas investors, like the above, retracting their money from Australian banks. Supply is greater than demand so price falls.
- Anonymous4 years ago
The decrease activity fee impacts the commercial equipment by banks in 2 significant strategies: decreases the attraction of deposits, making clientele more effective in all probability to make investments in corporation which stimulates the commercial equipment, and makes credit more low-priced, so businesses will borrow more effective to make investments and clientele will borrow more effective to eat. So if the banks do not bypass it on inspite of the truth that loans yet do in deposits, then there remains some stimulus. except by the banks, it is going to drop the speed on authorities bonds and different activity fee products which quite shifts traders to corporation funding. although the banks are having worry amassing short-time period funding, making their lending to businesses and clientele more effective extreme priced, it really is why they're no longer passing on the costs. So a minimum of the decrease places the banks in an superior position.