In this modern age of technological influence and digital advancement, it is fair to say that practically every notion of the modern world has been influenced by technological innovation in some way or another. From irritating redirects when browsing online, to currency conversion and the global currency exchange market (to name a few key examples), technology has made everything easier to access and take note of. In the case of the financial sector, the internet has made it easier to track, assess, and evaluate how national currencies are tracking in comparison to one another, and as individual financial standpoints. The foreign exchange market has had a busy year so far (as per usual). There seems to always be a new development in the international currency exchange.
In fact, there are always multiple developments within a twenty-four-hour timeframe. The nature of the foreign exchange market is that there is only one constant: change. Take the last few days’ activities surrounding the Australian dollar, for example. For the first time in two years, the RBA (Reserve Bank Australia) set in motion the first of what is expected to amount to three cuts. The Australian dollar has experienced something of a halt in international market value, prompting the RBA to respond by issuing the first cut in over two years. These interest rates cuts effectively marked the first time in years that substantial changes of this nature were actioned.
This development was not exactly unprecedented, given that Philip Lowe, Governor of the RBA, said earlier this year that the RBA would be considering the case for a cut at its next meeting, however it has still come as something of a shock to the system of this nation’s economy. When the cut rolled into action this past Tuesday, the Australian dollar rose in response, coming out on top ahead of its G10 rivals (including Pound Sterling). It is interesting to note here that interest rate cuts usually result in investors being driven away from a currency, due to the tendency of capital flows to move in the direction of the most favourable returns. In Australia, however, a cut essentially amounts to a vast improvement in the scheme of other currencies.
The fresh cut has come at a time when growth of the Australian dollar has slowed down, marking the falling outlook for the nation and its economy. Aiming to help assist in achieving the inflation target set in place, the notion has thrown the value of the Australian dollar high into the air. This move has been cast as a rare currency market response to a central bank interest rate cut, but nonetheless this is where the current circumstances surrounding the Australian dollar and the nation’s economy sit. While there is no certainty that the Australian dollar will continue its strengthening rise in the coming weeks as a direct result of the RBA cuts, it is speculated that there will be another two cuts before 2019 draws to a close.
