The Australian Dollar Index and the AUD/USD Rate have remained stable during the past couple of days following the Federal Reserve’s decision to keep interest rates at a record low. The Australian Dollar Index is closely watched by the US Dollar because it can dictate the strength of the USD (Dollar in Australian Dollar). The Australian Dollar Index is generally considered as a good indicator for the strength of the Australian Dollar against the US Dollar.
The decision to hike interest rates by a quarter point and a half points was met with shock in Australia which has been led to believe that the Central Bank of Costa Rica may have also announced a rate cut. There was no official announcement by Costa Rica’s Central Bank. However, analysts believe that both central banks are trying to stimulate their respective economies. This will help boost the competitiveness of the two countries and consequently affect their trade.
The Australian Dollar Index has also remained steady during the last couple of days. On the same day that the Central Bank of Costa Rica announced their interest rate cut, the Australian Dollar Index showed signs of weakening slightly. However, the index has since strengthened following the Central Bank of Costa Rica’s announcement. On the other hand, the United States Federal Reserve’s decision has left the Australian Dollar Index in free fall.
The Australian Dollar Index has been largely affected by the Federal Reserve’s move, and in some areas it fell sharply, although the weakness was relatively small compared with the market turmoil that occurred following the Fed’s announcement. The impact of the Fed’s decision on the AUD/USD Rate and the Australian Dollar Index has yet to be fully realised, so the impact on the economy may still be minimal.
However, analysts believe that this will put the Central Banks under greater pressure to further weaken their currency in order to encourage exports. They may also choose to hold off any further tightening of monetary conditions until more economic data becomes available, and allow the situation to calm down before making any further decisions.
The AUD/USD Rate and the Australian Dollar Index is expected to remain fairly stable over the coming weeks as many experts expect the Federal Reserve’s decision to stimulate the economy to push the AUD/USD Rate lower. into the lower end of its range. This may in turn allow the Australian Dollar Index to strengthen to a level at which the Federal Reserve would likely have to announce further tightening measures.
The Central Bank of Costa Rica’s interest rate cut could be an important catalyst for traders who are looking for a rise in AUD/USD Rate, but those looking for further weakening of the currency should stay away from the move. Traders should also keep an eye on the Bank of Japan’s announcement on Friday.
In the short-term, the moves by the Central Bank of Costa Rica and the Federal Reserve of the US, or the Bank of Japan may continue to weaken the Australian Dollar Index and the AUD/USD Rate to the extent that these central banks decide to raise interest rates in order to stimulate the economy. The AUD/USD Rate is a key market instrument for the traders who use it to gauge the health of the global economy and the markets.
However, the recent Fed announcements have provided a fresh impetus for those investors looking for a break from the lows reached in the last few months, and so it is not hard to see these moves have an effect on the AUD/USD Rate. The rise in the AUD/USD Rate may have been partly caused by the fact that the central banks were able to take steps to increase inflation pressures in the form of higher base money rates in the United States and Europe. In addition, central banks in the US and the EU have been forced to loosen policy to reduce the levels of consumer indebtedness and stimulate economic growth.
With the latest reports highlighting stronger economic growth in China and the US, and European economies, it is likely that the AUD/USD Rate will continue to increase as these emerging markets are seen as being less sensitive to developments in the United States and Europe. It is also possible that the Central Banks will announce further easing measures in the near future.
Regardless of how this economic news is interpreted, the AUD/USD Rate is unlikely to move lower as long as the Fed is continuing to tighten monetary conditions. The Federal Reserve has announced that it will continue to tighten monetary conditions, although this may only be for a limited period of time, which could lead to further volatility in the markets over the course of the next few months.