The announcement from RBA or the Central Bank of Australia showed a dovish situation. That pushed the AUD and made it slipped from the level of 0.7650 to 0.7605 against the American dollar. That was happened in the yesterday sales (April 6).
However, the experts stated that the currency pairs of AUD / usd has been too undervalued so that there is only a small space left for a further decline. Yesterday afternoon, RBA decided to maintain their interest rate reference. It is also the 3Y yield in Australia.
The level was 0.10 percent which is similar with the market expectation. Besides that, RBA stated again that they don’t have any plans to change the monetary policy at all, especially in a short-term period. It become a new thing to consider.
The Effect of the RBA Decision
RBA stated further that the council may not change the rate number until the continuous inflation is between the range of 2 – 3 percent. For this case, the salary growth should be more than nowadays. It requires the significant increase on the employment sector.
The increase on a tight job market may be required as well. The council doesn’t want that the whole requirements are fulfilled at least until 2024. Before, the analyst is so optimistic to the 2021 AUD outlook because of the commodity price increase.
That is also because of the global recovery from the pandemic. However, an attitude showed by RBA has a potential to raise the policy direction gap with the other countries which are planned to increase the interest rate or cut the quantitative easing faster than before.
At last, that thing can weight on the rally effort owned by the Australian dollar. It seems that the policy is not able to help that currency. It is especially to make it is fully recovered from it’s dark period. The currency of Australia still has a hope to survive.
AUD has Been Undervalued
The condition above is caused by the dovish attitude and less optimistic expectation about the employment recovery. At the same time, ING noted one thing. So far, the Australian dollar is undervalued. The amount is by almost 3.0 percent to the American dollar.
It is especially if the AUD/USD exchange rate is compared with the Performance of equity which is quite relative. Other comparisons are the increasing commodity price, and global risk. This thing is a sign that there is a more limited weakened space for AUD / USD.
It is especially for a short-term period. Elsewhere, on Tuesday the Statistic Institution of Japan published the spending household increased by -6.6% year-over-year in February. This number is worse than the period before which noted -6.1% and disappointing the market expectation.
The Japanese household outcome yesterday morning became the decline for three months. That happened in a row and related to the social limitation which is applied at the beginning of this year to handle the new variant of coronavirus increase in the world.
The Prediction Made by Analyst
Many analysts predicted that the Japanese economic will experience a contraction in the first quarter because the emergency status in Tokyo and some other areas. Although the Japanese economic is shadowed by contraction, some analysts still sure about a thing.
They are quite optimistic that the global economic can be realized gradually after many countries do the mass vaccination. This condition will increase the demand so that the Japanese export sector can be lifted and balancing the domestic consumption decrease.
In the separated release, the Japanese statistic institution also release the real salary data which increased by 0.2 percent for year-over-year in February. That continues the negative trend which was noted since the period before. Some factors have an impact on the real salary trend.
