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Market stability fuels travel confidence

October 5, 2018 Financial No Comments Email Email

The RBA’s decision to leave interest rates at record lows this week and stability with the AUD against major foreign currencies was fuelling confidence for Australian travellers heading overseas, according to Travel Money Oz.

“Over the past two weeks we have seen the AUD/USD remain in a holding pattern,’’ said General Manager for Travel Money Group, Kelly Spencer.

“Trading has remained within a one cent range, despite the Federal Open Market Committee (FOMC) decision to increase US interest rates by 25 basis points to 2.25% last week, and a further expected three 0.25% US rate hikes in the next 12 months.”

Ms Spencer said the hikes had been largely priced in by the market and the Fed’s decision to remove the word ‘accommodative’ from their accompanying statement meaning that interest rates can probably be described as nearing normal.

“In other words, there were no great surprises in the US market that have affected the Aussie dollar.

“Despite the markets reading quite heavily into the removal of the word ‘accommodative’, it makes sense as they are expected to keep increasing interest rates. The more they increase rates, the less accommodative they are to US citizens,’’ she said.

With that out of the way, Travel Money Oz says the market could focus on other factors such as the ongoing trade issues between the US and its trading partners.

“Canada, Mexico and the US reached a trade agreement which will support the CAD,” Ms Spencer said.

“This leaves the ongoing China v USA tariff story as the other major potential issue to be resolved. Though, the fact that Trump and his Canadian and Mexican counterparts were able to reach an agreement has lifted some of the pessimism around other agreements that are at various stages of negotiation.

“The best part for Australian travellers is that of these deals could be positive for the AUD.

Back on home soil, the RBA decided on Tuesday to leave rates on hold at 1.50%. It is likely that this will be the case for an extended period of time, which is good for consumer confidence.

“The AUD itself has been relatively steady against most of the major currencies in the last month or so, with the only exception being the AUD/JPY where the AUD has risen over 4% in the last three weeks.

“For Aussie travellers this means more yen in your back pocket, and more sushi on your plate in Tokyo,’’ she said.

For people travelling soon who may be worried about fluctuating exchange rates affecting their spending money, adding Rate Guard to their transaction when they purchase select currencies in store is worth considering.

That way, if the exchange rate improves within 14 days of purchase, Travel Money Oz will refund you the difference.

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