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Australian Dollar Drops After RBA Rate Cut, QE Boost

australiandollar july02 03nov20 lt

The Australian dollar fell against its major trading partners in the Asian session on Tuesday, after the Reserve Bank of Australia introduced a package of easing measures to stimulate the economy from the pandemic crisis.

The policy board of the Reserve Bank of Australia headed by the governor Philip Lowe decided to lower its key rate by 15 basis points to a record low of 0.10 percent.

The bank also decided to cut the target for the yield on the 3-year Australian Government bond to around 0.1 percent and to purchase A$100 billion government bonds of maturities of around 5 to 10 years over the next six months.

Further, the bank will reduce the interest rate on new drawings under the Term Funding Facility to 0.1 percent and cut the interest rate on Exchange Settlement balances to zero.

The bank said these measures will assist the recovery by lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets.

Investors awaited the U.S. presidential election taking place in the shadow of the Covid-19 pandemic.

The presidential race is headed for a tight finish, with reports suggesting that Democrat Joe Biden's lead has shrunk over the last few days.

The currency climbed against its major counterparts on Monday, except the greenback.

The aussie declined to 1.0605 against the kiwi, down by 0.4 percent from a 6-day high of 1.0645 seen at 7:15 pm ET. The aussie had finished yesterday's trading session at 1.0633 against the kiwi. Immediate support for the aussie is likely seen around the 1.03 level.

After rising to a 4-day high of 0.7063 at 10:30 pm ET, the aussie slipped 0.5 percent to 0.7030 versus the greenback. The pair had finished Monday's deals at 0.7053. Should the aussie falls further, it is likely to test support around the 0.68 region.

Having firmed to a 6-day high of 73.98 at 7:15 pm ET, the aussie turned lower against the yen, with the pair trading at 73.63. The pair was valued at 73.84 when it ended trading on Monday. Further fall in the currency may challenge support around the 72.00 level.

The aussie depreciated 0.6 percent to 1.6575 against the euro, following a 6-day rise to 1.6478 at 5:00 pm ET. The EUR/AUD pair was quoted at 1.6494 at Monday's close. Next key support for the aussie is possibly seen around the 1.70 level.

The aussie lost 0.2 percent to hit near a 2-week low of 0.9299 against the loonie. At Monday's close, the pair was worth 0.9322. The currency may test support near the 0.90 level.

Looking ahead, Swiss consumer inflation for October is due at 2:30 am ET.

U.S. factory orders for September will be released in the New York session.

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