Investing.com - The Australian dollar fell after the Reserve Bank of Australia on Friday slightly changed its growth and inflation forecasts despite a higher exchange rate, and said monetary policy will remain accommodative for an extended period.
The inflation outlook suggests there is still space capacity in the economy and "given that assessment, the board's view is that the current accommodative monetary policy setting is likely to be appropriate for some time yet," the RBA said in its statement of monetary policy.
The RBA did upgrade the outlook for the near term, forecasting growth of 3.0% year-on-year growth in June, compared with 2.75% in the February statement. But in the case of inflation, the RBA lowered its near-term projection to a 2.75% gain year-on-year for underlying inflation from 3.00% in the February statement.
"These minor revisions reflect the net effect of the rise in the exchange rate over recent months - which is expected, at the margin, to restrain exports and boost imports over the next two years - and a slightly stronger outlook for consumption and dwelling investment over the coming year," the RBA said.
AUD/USD fell to 0.9356, down 0.19%, and after China's April CPI and PPI data. CPI rose 1.8% year-on-year. less than the 2.0% expected and PPI fell 2.0%, more than the drop of 1.9% expected.
The New Zealand dollar reversed early gains following comments from the deputy central bank governor that the high exchange rate is a cause for concern.
NZD/USD traded at 0.8614, down 0.07%.
New Zealand housing market prices and the exchange rate are important variables for the pace and timing of interest rate hikes, Reserve Bank of New Zealand Deputy Governor Grant Spencer said Friday.
The RBNZ has raised the OCR 25 basis points twice since March to 3.00% now.
"A big uncertainty is the future path of the exchange rate, which has a major bearing on traded goods prices and overall economic activity," he said."The more downward pressure that the exchange rate exerts on prices and activity, the less pressure will need to be exerted by interest rates."
Overnight, the dollar edged higher against most major currencies after European Central Bank President Mario Draghi hinted that monetary authorities would be okay with implementing fresh stimulus measures in June.
The European Central Bank earlier left interest rates unchanged at 0.25%, though the euro dropped after Draghi said the ECB governing council is comfortable with acting at its next meeting in June, after the bank has published fresh forecasts for inflation and growth.
Draghi attributed weak inflation rates to food and energy prices, but added that the strong euro and weak domestic demand are also suppressing inflation rates.
Meanwhile in the U.S., the Department of Labor reported that number of individuals filing for unemployment assistance last week fell by 26,000 to 319,000 from the previous week’s revised total of 345,000.
Analysts had expected jobless claims to fall by 20,000 to 325,000.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.05% at 79.51.