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Australian Dollar Advances As RBA Holds Rate, QE Steady

The Australian dollar gained ground against its major counterparts in the Asian session on Tuesday, after the Reserve Bank of Australia left the cash rate and quantitative easing unchanged, saying that the economic downturn was not as severe as earlier expected and a recovery is underway in most parts of the country.

The board of Reserve Bank of Australia, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25 basis points.

Lowe said that fiscal and monetary stimulus will be required for some time amid uncertainty over the global outlook.

The bank vowed to maintain accommodative approach as long as it is required.

The Board will not raise the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band, Lowe said.

Risk sentiment lifted up as upbeat manufacturing data from the U.S., Europe and China raised hopes of a global economic rebound despite the coronavirus crisis.

Data from the Australian Bureau of Statistics showed that Australia’s retail sales grew at a moderate pace in June.

Retail turnover advanced 2.7 percent on a monthly basis in June, following a 16.9 percent increase in May. The rate was faster than the 2.4 percent increase estimated previously.

Separate report from the statistical office showed that the trade surplus rose to A$8.2 billion in June from A$7.34 billion in May.

Exports climbed 3 percent from the previous month and imports gained 1 percent in June.

The currency showed mixed performance against its major opponents on Monday. While it held steady against the kiwi and the yen, it dropped against the greenback and the euro.

The aussie added 0.5 percent to 0.7138 against the greenback, from a low of 0.7106 seen at 8:15 pm ET. The pair had finished Monday’s deals at 0.7123. The aussie is seen facing resistance around the 0.73 mark.

The aussie was up by 0.3 percent against the yen, at 75.71. The pair was valued at 75.47 when it ended trading yesterday. The aussie is likely to locate resistance around the 78.00 region, if it gains again.

Data from the Ministry of Internal Affairs and Communications showed that Tokyo inflation climbed 0.6 percent on year in July.

That exceeded expectations for an increase of 0.4 percent and was up from 0.3 percent in June.

After falling to 1.6540 at 8:15 pm ET, the aussie bounced off 0.3 percent to 1.6493 against the euro. The euro-aussie pair was quoted at 1.6509 at Monday’s close. Next near term resistance for the aussie is likely seen around the 1.62 level.

The aussie was 0.3 percent higher at 0.9555 against the loonie, recovering from a low of 0.9522 it set at 8:15 pm ET. At yesterday’s close, the pair was worth 0.9539. Extension of the aussie’s uptrend may lead it to a resistance around the 0.98 region.

The AUD/NZD pair approached 1.0786, gaining 0.1 percent. The aussie had finished yesterday’s trading session at 1.0771 against the kiwi. Immediate resistance for the aussie is possibly seen around the 9 1.09 level.

Looking ahead, Eurozone PPI for June will be featured in the European session.

U.S. factory orders data for June is set for release in the New York session.

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