​AUD/USD May Decline as RBA Implies Negative Rates

WikiFX News (24Oct.) - The Reserve Bank of Australias (RBA) latest minutes of the monetary policy meeting for October shows that the board has agreed to maintain highly accommodative monetary policies if necessary. It enforces market expectations for further dovish policies from the RBA, weighing on AUD/USD with the pair vulnerable to a move below 0.7000.

The RBAs Assistant Governor Kent reiterated that more monetary easing was on its way to increase employment, suggesting lower rates for longer. Kent also acknowledged that it was not impossible for the Bank Bill Swap Rate (BBSW) to move below zero, implying the idea that negative rates may be used as a monetary policy tool. As the RBA's next meeting approaches, markets may increasingly expect further stimulus measures, which dampens the sharp upside of the Australian dollar.

While the recent weakness in AUD/USD could be attributed to its failures in crossing the 100-day SMA level of 0.7100, the diminishing difference between the 10-year Treasury yields of the US Treasury (UST) and the Australian Government Bonds (AGB) also hampers its prices.

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Chart: Trend of AUD/USD