Currency ETFs: Australian Dollar Sinks on Rate Cut

May 7th at 8:54am by John Spence

CurrencyShares Australian Dollar Trust (NYSEArca: FXA) was down nearly 1% Tuesday morning after the central bank cut a key interest rate to the lowest level in a half-century.

The Reserve Bank of Australia lowered the official cash rate to 2.75% in a move that wasn’t widely expected.

“It is the seventh time the RBA has lowered rates since November 2011 in its effort to stimulate industries outside of the mining sector and offset the impact of the strong dollar which has traded above parity with its U.S. counterpart for almost a year,” the Financial Times reports.

FXA has fallen the past month. The Australian dollar is sensitive to commodities, which have also weakened recently. [Australian Dollar ETF Testing Key Resistance]

The Australian dollar fell to a two-month low against the U.S. greenback on Tuesday.

Analysts at Danske Bank in a MarketWatch report said the RBA “has for a while now been in wait-and-see mode looking for past rate cuts to work their effect on the economy, but weaker domestic data, a softer China, and a large-scale selloff in commodities appear to have convinced Governor Stevens and co. that the time is ripe for a continuation of the easing cycle.”

CurrencyShares Australian Dollar Trust

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The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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