A surprise move by the Bank of Japan to drop their interest rates into negative territory has seen the Aussie dollar fall overnight
The Aussie dollar has slipped after Japan took its interest rate into negative territory and warned it would cut further if necessary.
At 0700 AEDT on Monday, the local unit was trading at 70.82 US cents, down from 71.25 cents on Friday.
Bank of New Zealand currency strategist Jason Wong said the Aussie dollar had been in a trading range for the past couple of days following Japan’s surprise move.
The Bank of Japan on Friday stunned markets by cutting its rate to -0.1%, its boldest step yet to re-inflate the economy.
‘It was a huge shock to currency markets. We saw a lot of odd behaviour at that time,’ he said.
‘The kiwi and Aussie actually showed a lot of strength after that, which didn’t make a lot of sense.’
Mr Wong said the Aussie dollar was also pushed down on the weekend after US growth figures triggered a stronger greenback.
Growth braked sharply in the fourth quarter as US businesses stepped up efforts to reduce an inventory glut, while a rising US dollar and tepid global demand hurt exports.
Gross domestic product rose 0.7%, which was slightly below expectations.
‘But the composition of growth was much better, with consumer spending being a key driver, so the market actually liked it,’ Mr Wong said.
AAP
