SYDNEY: The Australian dollar fell on Tuesday after the central bank dropped a commitment to keep yields on its April 2024 target bond at 0.1%, signalling an earlier than previously expected rise in cash rates.
The move, which also drove gains in short-term bonds and dragged the New Zealand dollar slightly lower, shows the market was betting on a higher concession from the dovish central bank, strategists said. The Aussie was 0.25% lower at $0.75 shortly after the Reserve Bank of Australia’s monetary policy statement, well within its two-week range.
The kiwi also moved 0.1% lower to $0.7172.
The RBA said the decision to discontinue the yield target reflected an improvement in the Australian economy and the recent surprisingly high reading for third-quarter inflation.
It would, however, continue to buy government bonds at a pace of A$4 billion ($3.00 billion) a week until at least mid-2022 and emphasised that inflation was still too low.