TOKYO: The Australian dollar sank towards a four-month low on Tuesday after the central bank softened its tone on the policy outlook, raising expectations for an earlier interest rate cut.
The US dollar was steady against its major rivals and edged to its strongest this month versus the yen as traders looked ahead to a reading of US inflation on Wednesday for further clues on the pace of Federal Reserve easing.
The Aussie sank 0.71% to $0.63955 as of 0348 GMT, and earlier dipped to $0.6380, putting it in striking distance of the low of $0.6373 on Friday, a level that hadn’t been seen since Aug. 5.
The New Zealand dollar dropped in sympathy, declining 0.61% to $0.5830.
The Reserve Bank of Australia held rates steady as widely expected, but noted the board had gained “some confidence” that inflation was heading back to target.
The statement omitted a previous line that the RBA was “not ruling anything in or out”, as well as policy needing to remain restrictive.
“The RBA have just removed their hawkish bias, which is an important first step towards acknowledging cuts that markets are already pricing in for next year,” said Matt Simpson, a senior market analyst at City Index.
“The question now is whether they’ll sneak in a cut in Q1.” Traders boosted bets for a rate cut in February, with 13.6 basis points priced in for the meeting.
The US dollar index, which measures the currency against six major peers, was steady at 106.16.
The US currency eased 0.07% to 151.11 yen after earlier climbing to 151.55 yen for the first time since Nov. 28.
While markets have priced in a quarter-point Fed rate cut on Dec. 18 as a near certainty, the consumer price index due on Wednesday could shine some light on how much room policymakers have for easing next year.
Loonie, Aussie in focus while US dollar idles
Beyond US CPI, the main events of interest for investors this week are the European Central Bank meeting on Thursday, where a quarter-point cut is baked in, and China’s closed-door Central Economic Work Conference.
The euro was steady at $1.0554, while sterling edged down 0.08% to $1.27415.
The yuan strengthened 0.22% to 7.2525 per dollar in offshore trading, despite Chinese exports slowing more than expected last month, and imports unexpectedly shrinking.
The yuan was supported by Monday’s surprise shift in Beijing’s monetary policy stance toward more easing to boost the ailing economy, which bolstered confidence in assets.
Elsewhere, the Bank of Canada and the Swiss National Bank decide policy on Wednesday and Thursday, respectively, with deep rate cuts expected from both.
Against Canada’s loonie, the US dollar rose to its strongest level since April 2020 at C$1.41895.
The US currency inched 0.1% lower to 0.8778 Swiss franc .
Comments
Comments are closed for this article.