THE S&P/ASX 200 has hit its highest point in nearly seven years after the Reserve Bank of Australia cut interest rates to a record low.
The index immediately jumped 33 points in the minute after the announcement and continued to climb though the afternoon, breaking through the 5700-point mark to close at 5707.4 points, an 82-point or 1.5% jump.
The RBA cut the cash rate by 25 basis points to 2.25%, following many other central banks around the world in recent months.
RBA Governor Glenn Stevens said Australian growth was continuing at a below-trend pace and while lower energy prices were likely to boost consumer spending, the declining terms of trade was reducing income growth.
He also noted the recent decline of the Australian dollar against the US dollar.
“It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices,” he said.
“A lower exchange rate is likely to be needed to achieve balanced growth in the economy.”
The Aussie dollar, which had risen this morning back above US78c, plummeted after the announcement to a six-year low of 76.51c.
It was last trading at 76.6c.
Resources and energy stocks were the best performers on the market today, led by heavyweight BHP Billiton, which jumped 3.5% or $A1.05 to $30.65.
Fortescue Metals Group rose 2.6% to $2.37 while Rio Tinto gained 1.9% to $58.58.
Copper-gold producer PanAust was a standout, jumping 6.8% or 8c to $1.245, despite a drop in the copper price overnight.
At the junior end, Mark Creasy-backed explorer Windward Resources was the biggest mover, jumping 63.6% to 18c, backing up a 19% jump last Thursday.
The company announced that downhole surveys had identified a strong off-hole conductor at the Turcaud prospect at the Fraser Range North project.
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