RBA Keeps Rate at 4.25% - 6.3.2012

US Dollar The dollar rose yesterday to an almost three-week high, as the currency’s index climbed to 79.57. However the data from the United States was mixed yesterday. Factory orders decreased for the first time in three months in January by 1%, following a 1.4% increase in the previous month. At the same time service industries unexpectedly grew in February at the fastest pace in a year. The Institute for Supply Management reported its non-manufacturing index climbed in February to 57.3 from 56.8 in January. The dollar also gained ground after Federal Reserve Bank of Dallas President Richard Fisher said yesterday he saw “no need to administer additional doses” of stimuli and inject more money into the economy. Euro The euro maintained a narrow range against the greenback (1.3186-1.3225) in Asian trading hours, close to a three-week low 1.3159, and extended losses against the Japanese yen as economists predict reports today may show the region’s economy shrank in the fourth quarter of 2011. According to preliminary estimations, the euro area GDP declined by 0.3% in the last three months of 2011. Another considerable risk for the single currency is Greek bond swap deal. Yesterday Greece’s Finance Minister Evangelos Venizelos told reporters that authorities may complete bond exchange with private investors by March 8 in order to receive a 130 billion-euro bailout. Australian Dollar The Reserve Bank of Australia decided to leave the cash rate unchanged at 4.25%. According to the statement on monetary policy of Glenn Stevens, the governor of the central bank, recent information confirms “the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring.” At the same time Australian “growth is expected to be close to trend and inflation close to target” judging that the current monetary policy remained appropriate for the moment. However Stevens noted if “demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy”, leaving therefore space for possible rate reductions in the future. The aussie dropped to 1.0603 versus the US dollar in Asian trading hours, touching the lowest level since February 23.