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Australian Dollar Spikes Higher As RBA Maintains Cash Rate

AUD USD 10Minutes 100113

The Australian dollar rallied on Tuesday after the Reserve Bank of Australia kept its benchmark cash rate at a record-low of 2.5 percent. The RBA noted that the effects of monetary policy easing since late 2011 are still having an impact on the economy.

The decision was in line with economists' expectations.

The Reserve Bank Board noted that the current setting of the monetary policy remained "appropriate".

The Board said it will "continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target."

Stevens said the full effects of easing in monetary policy since late 2011 are still coming through, and will be for a while yet.

Concerns about U.S. government shutdown pressured the aussie in early Asian deals. The U.S. was bracing for shutdown of large sections of government as Congressional leaders wrangled over a spending bill.

The aussie recovered after better-than-expected Australia retail sales, which rose a seasonally adjusted 0.4 percent to A$21.923 billion in August.

The aussie advanced almost 1.1 percent to hit a 5-day high of 0.9393 against the U.S. dollar, snapping back from a previous low of 0.9289. The extension of the uptrend could see the aussie eying resistance around the 0.95 area.

The aussie that rebounded from a 4-day low of 1.4553 against the euro earlier climbed further, reaching a 4-day high of 1.4425. If the aussie extends its bull rally, it may probably face resistance at the 1.435 level.

The aussie rallied to a 4-day high of 1.1299 against the NZ dollar, following a 2-month low of 1.1212 touched at the beginning of Asian deals. The next resistance for the aussie is around the 1.14 zone.

Bouncing off from a previous low of 91.38 against the yen, the aussie climbed to a 4-day high of 92.24. The aussie is likely to challenge resistance at the 92.8 level. At Monday's close, the pair was worth 91.54.

An index measuring business sentiment in Japan surged in the third quarter of 2013, the Bank of Japan revealed today in its quarterly Tankan business survey.

The index measuring sentiment among large manufacturers index came in at a score of 12, beating forecasts for 7 and up from 4 in the second quarter.

The aussie strengthened to a 5-day high of 0.9689 against the loonie, a 1.00 percent increase from the low of 0.9595 hit at 8:55 pm ET. The aussie is poised to test resistance at the 0.975 level. The pair was worth 0.9604 at yesterday's close.

In the European session, PMIs from major European economies, the German unemployment rate for September and the Eurozone unemployment rate for August are set for release.

The U.S. ISM manufacturing index for September and construction spending for August are slated for release in the New York session.

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