The Reserve Bank of Australia dismissed pressures for an emergency cut in interest rates as investor concerns grow over a global slowdown which has been hurting the aussie dollar this week.
The Australian dollar tumbled under parity against its U.S. counterpart at one point, having shed a startling 9 percent in little more than week yet the RBA offered no hint it was even considering cutting its 4.75 percent benchmark interest rate, and instead pointed to stability in local money markets.
“The RBA is monitoring market developments carefully,” the spokeswoman said. “With no strains evident in the money market, the RBA market operations continue to be conducted as usual.”
The central bank’s reasoning is that this current market crisis is not a replay of 2008 in that the global financial system has not frozen and there is plenty of liquidity around.
The central bank, wary of rising inflation, considered tightening at its policy meeting last week but was forestalled by the acute unease in markets though they did acknowledge that the risks to global economic activity were weighted to the downside. The focus is now on the next September 9 RBA meeting to see if there will be any change in monetary policy.
The aussie managed to rebound against the dollar in Asian trading today. Speculation that Beijing will widen the US dollar-yuan band following a record high fix in China’s currency earlier in the day was seen as negative for the greenback across the board, and provided support to the Aussie.