FX.co ★ Australian dollar falls amid higher inflation and current monetary policy

The Aussie is having a hard time: it is once again in the collapse zone. The Australian dollar began to lose ground after the regulator refused to raise interest rates.

The Reserve Bank of Australia (RBA) does not intend to raise its key rate as the ECB does. According to Philip Lowe, governor of the bank, soaring housing prices and the inflation rate of 2.5% are not a reason to increase the interest rate. The governor drew attention to the high inertia of wages and inflation in the country. Despite long-term price pressures, the regulator is ready to leave the current monetary policy in 2022 unchanged.

The situation boosted bearish sentiment in the Aussie triggering its fall. On Wednesday, November 17, the Australian dollar collapsed to its lowest monthly level. The catalyst was the current payrolls report in Australia, which failed to confirm the need for a tightening of the monetary policy. As a result, the AUD/USD pair declined by 0.21% to 0.7289. Later the pair continued its downtrend. On Thursday, November 18, it was hovering near a six-week low, trading at 0.7278.

Such factors as the falling hydrocarbon market and a sharp decline in risk appetite among investors worsened the situation. This finally turned the Australian dollar into a downtrend. However, analysts admit changes in the dynamics of the Aussie in the medium- and long-term.

At the same time, the Australian futures market disagrees with the RBA's decision to maintain the existing monetary policy in 2022 and leave interest rates unchanged. Traders and investors still expect a 100 basis points (bps) raise by early 2023. Experts believe that the first rate hike (to 0.25%) will take place in the middle of next year. Earlier, Lowe postponed the increase of RBA rates for an indefinite period. It is not excluded that the activity of market participants in this question will stimulate him to reconsider the current decision.