News Column

Australian Dollar Recovers After RBA Rate Decision

August 4, 2014

CANBERA (Alliance News) - The Australian dollar recovered from its early low against the other major currencies in the Asian session on Tuesday, after the Reserve Bank of Australia maintained its interest rate unchanged at 2.50% as widely expected by economists.

The monetary policy board kept the cash rate unchanged at 2.50%. The rate has been at the current level since August 2013.

The board assessed that the monetary policy is appropriately configured to support sustainable growth in demand and inflation outcomes consistent with the target. The bank estimates inflation to be consistent with the 2-3% target over the next two years.

Meanwhile, a report from the Australian Bureau of Statistics showed that Australia saw a seasonally adjusted merchandise trade deficit of AUD1.683 billion in June.That beat expectations for a shortfall of AUD2.0 billion following the downwardly revised AUD2.043 billion deficit in May. Exports were flat on month at AUD26.620 billion, while imports eased 1.0% to AUD28.302 billion.

Data from the Australian Industry Group showed that its performance of service index for Australia continued to contract in July, although at a slower pace - which came in with a score of 49.3. That's up from 47.6 in June.

The results of a survey by ANZ Bank and Roy Morgan Research showed that the consumer sentiment index for Australia dropped to 115.3 in the week ended August 3, compared to 116.2 in the previous week.

The Australian dollar recovered to a 1-1/2-month high of 1.0194 against the Canadian dollar, from an early low of 1.0166. If the aussie extends its gain, it may find resistance at the 1.02 level.

Against the US dollar and the euro, the aussie bounced back to 5-day highs of 0.9342 and 1.4364 from early lows 0.9315 and 1.4402, respectively. At yesterday's close, the aussie was trading at 0.9331 against the greenback and 1.4376 against the euro. If the aussie extends its uptrend, it is likely to find resistance around 0.94 against the greenback and 1.42 against the euro.

The Australian dollar recovered to a 4-day high of 95.77 against the yen, from an early low of 95.54. The pair was quoted at 95.71 at yesterday's close. The aussie may test resistance near the 96.00 area.

The service sector in Japan moved to expansion in July with a score of 50.4, a survey by Markit Economics revealed. That's up from 49.0 in June.

The Australian dollar, which closed yesterday's deals at 1.0945 against the NZ dollar, edged up to 1.0958. This may be compared to an early low of 1.0938. The next possible upside target for the aussie-kiwi pair lies around the 1.10 zone.

Looking ahead, PMIs from major European economies for July and Eurozone retail sales for June are due in the European session.

In the New York session, ISM US non-manufacturing index for July and factory orders for June are due to released.

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Source: Alliance News

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