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Australian Dollar Climbs As RBA Holds Rate Steady, Lockdowns Ease

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The Australian dollar spiked up against its major trading partners in the Asian session on Tuesday, as the Reserve Bank of Australia kept its cash rate and the target yield on three-year government bonds unchanged, and the optimism about easing coronavirus-triggered lockdown restrictions in some countries boosted sentiment.

At the monetary policy meeting, the RBA board kept its interest rate at a record low 0.25 percent and the targeted yield on three-year government bonds at around 0.25 percent.

The bank said the target will remain in place until progress is being made towards the goals for full employment and inflation.

The central bank announced that it would scale back its bond-buying program, which has totaled A$50 billion.

The bank said it is committed to do what it can to support jobs, incomes and businesses during this difficult period and to make sure that Australia is well placed for the expected recovery.

Several countries including Italy and the U.S. are planning to ease lockdown restrictions, boosting equities and oil prices.

Italy has permitted 4.5 million people to return to work but not without masks and gloves. Restaurants, parks and public transports have been re-opened too.

In economic releases, survey data from IHS Markit showed that Australia's service sector contracted at a record pace in April as strict measures to contain the coronavirus disease outbreak impacted the activity.

The Commonwealth Bank of Australia Services Business Activity Index fell steeply to 19.5 in April from 38.5 in March.

The currency showed mixed performance on Monday, by rising against the kiwi and the euro but holding steady against the greenback and the yen.

The aussie added 0.7 percent to a 4-day high of 0.6462 against the greenback, after falling to 0.6417 at 5:30 pm ET. The pair had finished Monday's deals at 0.6422. Further rally in the currency may face resistance around the 0.68 level.

The aussie was up by 0.5 percent against the yen, touching a 4-day high of 68.90. The pair was valued at 68.54 when it ended trading on Monday. Should the aussie strengthens further, it is likely to test resistance around the 72.00 region.

The aussie appreciated to 1.6876 against the euro, registering a gain of 0.6 percent from a low of 1.6985 set at 6:45 pm ET. The euro-aussie pair was quoted at 1.6964 at Monday's close. Next immediate resistance for the currency is likely seen around the 1.61 level.

The aussie was 0.3 percent higher against the loonie, trading at a 4-day high of 0.9076. At Monday's close, the pair was worth 0.9050. Extension of the aussie's rally may lead it to a resistance around the 0.92 region.

The aussie remained steady against the kiwi, after having risen to 1.0642 at 10:45 pm ET. The aussie had finished yesterday's trading session at 1.0614 against the kiwi. The aussie is likely to challenge resistance around the 1.09 mark.

Data from Statistics New Zealand showed that New Zealand building permits plunged a seasonally adjusted 21.3 percent on month in March, coming in at 2,904.

That follows the upwardly revised 5.7 percent increase in February.

Looking ahead, U.K. construction PMI for April and Eurozone PPI for March will be featured in the European session.

In the New York session, U.S and Canadian trade data for March and U.S. ISM non-manufacturing composite index for April will be out.

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