Drops to near 7,780, weighing down by the real estate and IT sectors – Crypto News – Crypto News
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Drops to near 7,780, weighing down by the real estate and IT sectors – Crypto News

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11 months ago

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  • ASX 200 Index loses ground as the real estate and information technology sectors weaken.
  • Wall Street declined as the US Treasury yields have risen after strong US economic data.
  • Resonance Health is to acquire TrialsWest in an $8 million deal.

The ASX 200 Index continues its decline, nearing 7,780 and dropping by nearly 0.90% on Wednesday, following a downturn on Wall Street the previous day. The domestic equity market is weighed down by the real estate and information technology sectors, which are sensitive to interest rate changes. US Treasury yields have risen after strong US economic data, leading to speculation that the Federal Reserve (Fed) may be cautious in reducing borrowing costs.

According to Westpac’s summary of the Reserve Bank of Australia (RBA) March meeting minutes, the current cash rate level is deemed appropriate for the time being, although conditions may evolve. The Board also indicates a balanced approach as the preferred model for future policy implementation.

The ASX 200 Index saw Regis Resources as the weakest performer, plunging by 5.21% to 1.91, followed by Credit Corp Group, down by 4.83% to 17.95, and Arcadium Lithium, which dropped by 3.94% to 4.14. In the meantime, the top gainers included Ramelius Resources, surging by 10.06% to 1.99, West African Resources, rising by 4.31% to 1.33, and Boss Energy, gaining by 3.43% to 5.12.

Boss Energy has reached a crucial technical milestone in its Honeymoon re-start strategy, clearing the path for the first drum of uranium to be filled within the next two weeks at the South Australian mine. The company has effectively filled the processing plant’s ion exchange (IX) column with uranium-rich lixiviant sourced from the Honeymoon wellfields.

Resonance Health is positioned to finalize the acquisition of TrialsWest in an $8 million deal, thereby broadening its global clinical trial outreach. TrialsWest, renowned as one of Australia’s most seasoned clinical research centers, engages in collaborations with prominent pharmaceutical and biotechnology firms across the globe. Its mission revolves around facilitating the development of novel medicines and vaccines for the benefit of the global community.

 

RBA FAQs

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high-interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation has always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

 

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