Australian Banks To Face Pressure Again On Rates

Last month the Reserve Bank of Australia (RBA) cut rates by 50 basis points. If it cuts rates again in its June meeting on Tuesday, Australian banks may still not pass on the full difference to borrowers like last time. The market, on the other hand is rooting for a big cut.

Financial markets, however, are already raising their bets that the  central  bank will announce a second so-called ”super-sized”  50-basis-point cut in its  cash rate at this morning’s board meeting.  Credit Suisse figures yesterday  showed that investors were pricing in  the chance of a half-percentage-point  reduction to 3.25 per cent as  almost a three-in-four chance.

Though a rate cut would put pressure on the Aussie dollar, it still managed to edge upward ahead of RBA’s decision.

At 7am AEST on Tuesday, the local unit was trading at 97.28 US cents, up from  96.65 cents on Monday.

GFT Forex director of currency research Kathy Lien said a lack of liquidity  in the market could have pushed the dollar higher, but there was a risk that it  would fall later on Tuesday.

“We’ve had very little price action today,” she said.

“We shouldn’t make too much of the Aussie dollar’s rebound, because UK  markets are closed yesterday and tomorrow, so there’s a significant drop-off in  borrowing in the market.”

A rate cut – and suggestion of stronger moves ahead by the RBA – would be the  most likely cause of weakness for the local currency on Tuesday, Ms Lien  said.

Print Friendly, PDF & Email