FXStreet (Delhi) – Derek Halpenny, Research Analyt at MUFG, notes that Australian dollar is the best performing major currency this morning given the failure of the RBA to ease and while the statement contained a more explicit bias to ease the statement also clearly indicated some increased confidence from the central bank. Key Quotes “The hope of additional monetary easing can be maintained after the RBA statement today, released after its monetary policy meeting, made more explicit its bias to ease by stating that “the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand”. “The message from the RBA is becoming a little clearer – we can ease again if we wish to given the low level of inflation, but the gradual improvement in economic conditions means we do not have to.” “However, we believe the RBA might well have been a little premature in expressing optimism in the prospects for improvement in the coming months. Iron ore prices have recently taken another leg lower and are down 12.5% from a recent peak in mid-October and are at a level not seen since July. A further terms of trade shock at this point would clearly undermine the prospects for growth going forward. The optimism of the RBA may stem from a belief that policy action from the Chinese authorities will stabilise economic conditions there. However, we expect to see a continued moderate slowdown in economic growth going forward.” “We still expect AUD/USD to drift lower from here and see little upside from current levels. The risk to our forecast of 0.6800 by year-end is that the Fed doesn’t act and the Chinese authorities do manage to stabilise economic conditions into year-end. Then the optimism expressed by the RBA today may be justified and AUD/USD would more likely to rise from current levels than fall.” For more information, read our latest forex news.