Forex – Aussie Drops on RBA Forecast Cut; U.S. Dollar Edges Up

FILE PHOTO: An Australia Dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo – The Australian dollar fell against the U.S. dollar on Friday in Asia after the Reserve Bank of Australia (RBA) slashed its GDP growth forecast for the year through June.

In its quarterly statement on Monetary Policy today, the central bank cut the GDP growth forecast to 2.5% from the previous 3.25%.

For the year to June 2020, the RBA cut its projection to 2.75% from 3.25% and sees 2021 growth at 2.75%. Unemployment is seen at 5.0% through 2019, unchanged from its current level.

On inflation, the headline CPI forecast was cut to 1.25%.

The AUD/USD pair fell 0.3% to 0.7077 following the news. The Australian currency has now shed 2.4% of its value so far this week.

Meanwhile, the U.S. dollar traded near a two-week high, supported by safe-haven demand, after President Donald Trump said this week he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline to achieve a trade deal.

White House economic advisor Larry Kudlow warned that there is a “pretty sizable distance to go” before China and the U.S. could reach an agreement, while Treasury Secretary Steven Mnuchin also noted this week that “wide range of issues” remains to be worked out.

China and the U.S. have until the start of March to strike a trade deal before additional tariffs on Chinese imports kick in.

The U.S. dollar index that tracks the greenback against a basket of other currencies last traded at 96.345, up 0.1%.

Elsewhere, the USD/JPY pair edged down 0.08% to 109.70.