Australia Keeps Rate at Historic Low 2.25%

Marcus Jacob
07 Apr, 2015
New York City

Reserve Bank of Australia left benchmark rate at historic low of 2.25% and held out for an increase at the next meeting in May. Australian dollar spiked up. Leighton with its partner won a $608 million contract to build reservoirs in Qatar. Rio Tinto completed its $500 million share buyback program.

[R]5:30 PM Sydney – Reserve Bank of Australia left reference rate at historic low of 2.25% and held out for rate increase at the next meeting in May. Australian dollar spiked up. Leighton with its partner won a $608 million contract to build reservoirs in Qatar. Rio Tinto completed its $500 million share buyback program.[/R]

Stocks traded higher up to the RBA rate decision announcement and fell sharply after the news but managed to recover in the final hour of trading.

RBA, left interest rate to historic low of 2.25% as policy makers grappled with the weakening terms of trade for Australian exports and sustained housing prices in several large metropolitan cities.

In an accompanying statement, RBA Governor Glenn Stevens said moderate growth in the global economy is expected in 2015 and Australian dollar has declined noticeable against a rising US dollar over the past year.

The policy committee also held out for future rate cut as early as at the next meeting in May depending the economic data on growth and inflation.

Australian dollar spiked after the rate decision and closed at 76.91 U.S. cents and in stock trading turnover increased to 669 million shares worth $5.2 billion.

At close, the ASX 200 Index jumped 27.40 or 0.5% to 5,926 and the broader All Ordinaries Index gained 23.50 to 5,893.20.

In commodities trading, gold soared US$10 to US$1,214 an ounce and Brent crude slid 16 cents to close at US$57.96 a barrel.

Australian Stock Movers

Abacus Property Group fell 0.3% to $2.87 after the property developer divested its Aspley Village Shopping Centre in Queensland to an unnamed buyer for $32.25 million and the transaction is expected to close in June.

BHP Billiton Limited increased 0.8% to $30.45 after the diversified mining company plans to construct a new retail facility in the town of Newman in Western Australia with an estimated cost of $30 million. The construction is expected to start around June.

Leighton Holdings Limited gained 1.5% to $21.15 after the construction and mining company secured a contract worth $608 million to build five concrete reservoirs in Qatar.

The project is expected to start this month and scheduled to complete in the second-quarter of 2018.

Rio Tinto Limited increased 0.7% to $56.15 after the mining company announced the completion of off-market buy-back offer of about 11.6 million shares worth $560 million, ahead of its target of $500 million.

The buy-back price was $48.44 per share, 14% discount to the market price.

The company added it will continue to buy-back its UK-listed shares till the year-end for a total of US$1.56 billion.