Taking a Fundamental Approach to Forex Trading

Trading the Australian Dollar with THE RBA RATE DECISION

The Reserve Bank of Australia is the central financial authority that forms, directs, and adjusts the Australian Monetary policy. In order to keep inflation at targeted levels (2-3%), and to keep the growth of Australian economy, the RBA Board meets eleven times each year on the first Tuesday of each month expect January. The purpose behind these meetings is setting the future course of the Australian overnight interest rate.

RBA BOARD
The Reserve Bank Board comprises eight members beside the secretary of the treasury:
*Governor
*Deputy Governor
* 6 external members appointed by the secretary of treasury

Whether the RBA tends to increase, decrease, or maintain interest rate, the decision always has a direct impact on the Australian Dollar and this is why...

•	By increasing interest rate, the RBA is literally selling Australian government securities to major financial dealers who in turn would pay by transferring money to the RBA account. This would decrease the supply of the Australian Dollar in the banking system and hence appreciate its value.
•	By cutting interest rates, the RBA is literally buying Australian government securities from major financial dealers who in turn would get paid by transferring money into their accounts from the RBA. This would boost up the supply of the Australian dollar in the banking system and hence depreciate its value.