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Australian Dollar Rallies As RBA Holds Rate Steady

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The Australian dollar drifted higher against its major trading partners in the Asian session on Tuesday, after the Reserve Bank of Australia kept its cash rate on hold and asserted that it is willing to reduce interest rates further if needed to support sustainable growth in the economy and attain the inflation goal.

The board of the Reserve Bank of Australia, governed by Philip Lowe, decided to leave the cash rate unchanged at a record 0.75 percent.

"With interest rates having already been reduced to a very low level and recognizing the long and variable lags in the transmission of monetary policy, the Board decided to hold the cash rate steady at this meeting," the bank said in a statement.

The interest rates are set to remain low for an extended period so as to reach full employment and achieve the inflation target, the bank added. It remains prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.

The aussie was modestly higher on Monday, as China's central bank unexpectedly lowered the interest rates on reverse repurchase agreements and pledged to inject $174 billion of liquidity into markets.

The aussie gained 0.1 percent against the kiwi and 0.4 percent against both the yen and the euro for the day. Last week, the currency plunged as the spread of the coronovirus virus in China sapped risk sentiment.

The aussie climbed to a 4-day high of 0.6725 against the greenback, up by almost 0.7 percent from more than a 4-month low of 0.6679 seen at 8:00 pm ET. The aussie-greenback pair had ended Monday's trading session at 0.6692. Continuation of the aussie's uptrend may see it facing resistance around the 0.71 region.

The Australian currency gained 0.6 percent against the yen, rising to a 4-day high of 73.15. The pair was valued at 72.73 at Monday's close. Next immediate resistance for the aussie is likely seen around the 74.5 level.

Data from the Bank of Japan showed that Japan monetary base grew 2.9 percent on year to 514.132 trillion yen in January, slowing from an annual 3.2 percent growth in December.

Banknotes in circulation and coins in circulation both rose 2.2 percent on year, while current account balances gained 3.1 percent and reserve balances climbed 2.7 percent.

The aussie was up by 0.7 percent at a 4-day high of 1.6442 against the euro, following a decline to 1.6561 at 8:00 pm ET. At Monday's close, the pair was quoted at 1.6526. Further rally in the aussie is likely to test resistance around the 1.61 region.

The aussie added 0.5 percent to reach near a 2-week high of 1.0396 against the kiwi, after depreciating to 1.0349 at 6:00 pm ET. The aussie was trading at 1.0356 per kiwi when it finished deals on Monday. The aussie is seen locating resistance around the 1.05 level.

Data from Statistics New Zealand showed that New Zealand building permits rose a seasonally adjusted 9.9 percent on month in December, coming in at 2,910. That follows the upwardly revised 8.4 percent drop in November.

Breaking the 0.89 level, the aussie rose percent to an 8-day high of 0.8936 against the loonie. At yesterday's New York session close, the aussie-loonie pair was worth 0.8891. The aussie may target resistance around the 0.92 level.

In today's economic releases, U.K. construction PMI for January and Eurozone PPI for December are set for release in the European session.

In the New York session, U.S. durable goods orders and factory orders for December are scheduled for release.

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