ForexLive Asia-Pacific FX news wrap: RBA raises its cash rate to the highest in 12 years |

After
four months of pauses (July,
August, September and October) the Reserve Bank of Australia raised
interest rates, taking the cash rate 25 basis points higher to 4.35%.
This is the thirteenth cash rate hike since the cycle began in May 22
and moves
the rate to its highest in 12 years.

AUD/USD
dropped away after the announcement. Some attributed this to the rate
hike being widely expected, while another response I saw was that the
Statement from Reserve Bank of Australia Governor Bullock watered
down forward guidance and dropped a hint that the RBA sees the peak
as being in. I’m going to disagree with this take. Even if the RBA does believe
the peak is in I’d argue they have little basis for making this
assertion. The RBA has been more reluctant, and slower, to hike than
most other DM central banks and here we are hiking while others are
not. RBA forecasting has not been of high quality. I read the
statement as nodding to data dependence.

Elsewhere
we had October trade data from China today. This showed a welcome
beat for imports. Recovering China imports are welcome and are a
positive for China-proxy trades such as AUD (although not today, see
above!). Exports missed though, which was blamed on slow global
demand.

Also
in China, a senior People’s Bank of China was relaxed about the
economy, saying some debt risks will recede while and the property
market has long-term potential.

While
on central banks, Minneapolis Federal Reserve Bank President Neel
Kashkari said the FOMC has more work to do in bringing inflation
under control and further hikes may well be needed.

The
USD strengthened pretty much across the major FX board. AUD, CAD and
NZD were notable losers. USD/JPY is back above 150.

As I post the Australian dollar is losing further ground.