Bloomberg News

Aussie Fluctuates as Reserve Bank Cites European Debt Turmoil

June 21, 2011

June 21 (Bloomberg) -- The Australian dollar fluctuated after the Reserve Bank said in minutes of this month’s meeting it was “prudent” to keep interest rates unchanged on concern Europe’s debt crisis will worsen.

“The RBA highlights risks in the global economy and the euro-zone debt crisis, but at the same time, they note fairly firm growth in terms of domestic wages and further tightening needed at some point,” said Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole SA in Hong Kong.

Australia’s dollar was little changed at $1.0594 at 12:49 p.m. in New York, compared with $1.0582 yesterday. The Aussie traded at 84.86 yen, compared with 84.93. New Zealand’s dollar gained 0.3 percent to 81.24 U.S. cents. The kiwi traded at 65.08 yen, compared with 65.02 yen.

“Members judged that it would be prudent to leave the stance of policy unchanged, pending further data on international developments,” according to minutes of the RBA’s June 7 meeting. A likely acceleration in inflation from commodities-led growth “suggested that further tightening in monetary policy would be necessary at some point,” the central bank’s minutes said.

RBA Governor Glenn Stevens has paused at 4.75 percent after seven increases in the overnight cash rate target from October 2009 to November.

Spain’s efforts to repair its economy are “incomplete” and risks are “considerable,” the International Monetary Fund said in a report.

While Spain’s government has implemented a “wide-ranging policy response” over the past year, “there can be no letup in the reform momentum,” the IMF said.

If Greece’s Prime Minister George Papandreou survives today’s confidence vote, he will seek approval in parliament next week for a five-year economic plan to help persuade international officials to lend additional financial support.

--Editors: Dennis Fitzgerald

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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