Australian Dollar Nudges Higher; RBA Fans Debate Rate Cuts

 
   By James Glynn 
 

        SYDNEY--The Australian dollar nudged higher Friday as downward revisions to economic growth and inflation announced by the central bank were not as stark as some had feared.
        At 0515 GMT, the Australian dollar was changing hands at US$0.7830, up from US$0.7781 late Thursday.
        The Reserve Bank of Australia lowered both its medium-term forecasts for inflation and economic growth, saying the economy won't grow fast enough in the next year to prevent a further rise in unemployment.
        The central bank now expects gross domestic product growth between 2.25% to 3.25% through 2015, down a quarter percentage point from its November outlook. Inflation is forecast between 2% to 3% for the same period, compared with a prior view of 2.5% to 3.5%.
        The Aussie rose as revisions to growth and inflation "were a little smaller than they could have been," said Michael Turner, currency strategist at RBC Capital Markets.
        The RBA cut interest rates by one quarter of a percentage point Tuesday to a record low 2.25%, its first cut since August 2013, citing falling global interest rates. The cut represented a big change for the central bank which ended 2014 with a message that policy stability would be best the economy.
        Financial markets are now betting the RBA will cut interest rates at least one more time by mid-2015, with some market participants expecting it will continue cutting in the second half of the year.
        Bill Evans, chief economist at Westpac said the new RBA growth forecasts incorporated Tuesday's cut, which implied further cuts would be needed.
        "These forecasts are a reasonable signal the Bank forecasts that further rate cuts" are likely, he said. A speech by RBA Governor Glenn Stevens on Monday will be closely watched for any hints about another cut.
        Elsewhere, financial markets will watch closely a vote on Tuesday that could topple Prime Minister Tony Abbott from power. A lot of speculation surrounds Abbott's possible defeat and whether he would be replaced by former Liberal-National coalition leader Malcolm Turnbull.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        February 06, 2015 00:54 ET (05:54 GMT)

#FX
#Forex
#RBA_Fans
#RateCuts
#AustralianDollar