The RBA minutes noted that the Australian dollar had been volatile, depreciating sharply in early April before rebounding. On a trade-weighted basis, the Australian dollar was around the same level as it was in late 2024, the central bank said. A broad-based depreciation of the US dollar and the Chinese renminbi since early April had offset depreciation of the Australian dollar against the currencies of most other trading partners. Members discussed the somewhat unexpected depreciation of the US dollar in response to the announced increase in US tariffs, which might have been expected to produce an appreciation as the outlook for import growth worsened. The depreciation might reflect an uncertainty premium being applied to US-dollar assets, a correction of previously overweight exposures to US assets or changes in hedging behavior, RBA noted. The AUD/USD pair was quoting at 0.65, down half a percent on the day. In early April, the counter has sharply depreciated to as much as 0.59 before recovering to 0.64 levels by end of April.
Meanwhile, dovish signals from the Reserve Bank coupled with a host of weak economic readings for the first quarter– including a bigger-than-expected current account deficit weighed on the local unit today. The RBA had cut rates by 25 basis points in May, and presented a largely dovish outlook on the Australian economy, citing increased headwinds from trade tariffs. RBA Minutes of its May monetary policy meeting suggested that the board viewed the case for a 25 basis point cut as a stronger one, preferring a policy to be cautious and predictable. Members also noted that the outlook for the global economy had deteriorated over the preceding three months, given developments in trade policies, but that the extent of the deterioration was unusually uncertain.