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Australian Dollar Spikes Up After RBA Maintains Record Low Rate


The Australian dollar gained ground against its key counterparts in the Asian session on Tuesday, after the Reserve Bank of Australia retained its record low-interest rate at its first meeting of this year, and on positive sentiment generated by recent U.S. data and strong corporate earnings.

The RBA kept its cash rate unchanged at 1.50 percent, as expected.

The central bank noted that the low level of interest rates is continuing to support the Australian economy.

Traders cheered the RBA statement that sounded less dovish than had been expected despite the deterioration in recent Australian economic data.

The Australian market surged, led by the major banks, following the positive cues overnight from Wall Street and on relief that the financial services' Kenneth Haynes royal commission report did not recommend anticipated harsh measures on banks.

Data from the Australian Bureau of Statistics showed that Australia recorded a seasonally adjusted merchandise trade surplus of A$3.681 billion in December.

That exceeded expectations for a surplus of A$2.225 billion and was up sharply from the A$1.925 billion surplus in November.

Separate data showed that Australia retail sales fell a seasonally adjusted 0.4 percent on month in December.

That missed expectations for a flat reading following the 0.4 percent increase in November.

The aussie showed mixed performance against its key counterparts on Monday. While it dropped against the greenback and the euro, it held steady against the yen and the kiwi.

The aussie added 1.0 percent to a 4-day high of of 0.7264 against the greenback, from a 6-day low of 0.7194 hit at 7:30 pm ET. At Monday's close, the pair was valued at 0.7226. On the upside, 0.74 is possibly seen as the next resistance level for the aussie.

Having fallen to a 4-day low of 79.09 against the yen at 7:30 pm ET, the aussie reversed direction and advanced to a 1-1/2-month high of 79.84. The pair ended yesterday's deals at 79.41. The aussie is poised to target resistance around the 81.5 mark.

The latest survey from Nikkei showed that Japan services sector continued to expand in December, and at a stronger pace, with a services PMI score of 51.6.

That's up from 51.0 in November and it moves farther above the boom-or-bust line of 50 that separates expansion from contraction.

Following a weekly low of 1.0456 touched at 9:00 pm ET, the aussie rebounded to hit a 5-day high of 1.0530 against the kiwi. The aussie-kiwi pair was quoted at 1.0491 at yesterday's New York session close. The aussie is likely to test resistance around the 1.07 level, if it advances again.

The aussie appreciated 1 percent to a 4-day high of 1.5738 against the euro, recovering from a 6-day low of 1.5898 seen at 7:30 pm ET. The aussie closed yesterday's deals at 1.5823 versus the euro. Continuation of the aussie's uptrend may see it challenging resistance around the 1.55 level.

The aussie spiked up to a 4-day high of 0.9520 versus the loonie, up 0.9 percent from near 5-week low of 0.9434 hit at 7:30 pm ET. The pair was valued at 0.9473 when it ended deals on Monday. Next key resistance for the aussie is possibly seen around the 0.98 mark.

Looking ahead, PMI from major European economies and Eurozone retail sales for December are due in the European session.

In the New York session, U.S. ISM non-manufacturing composite index for January is scheduled for release.

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