Australian Dollar Eases As RBA Sticks To QE Tapering

australiandollar july02 07sep21 lt

The Australian dollar pulled back from its recent highs against its major counterparts in the Asian session on Tuesday, after the Reserve Bank of Australia left its cash rate unchanged and decided to stick to a reduction in bond buying program despite virus worries.

The policy board of the RBA headed by Governor Philip Lowe decided to leave its cash rate unchanged at a record low of 0.10 percent.

The board maintained the target of 10 basis points for the April 2024 Australian Government bond.

The RBA pressed ahead with tapering its asset purchases. The bank today decided to purchase government securities at the rate of A$4 billion a week and to continue the purchases at this rate until at least mid February 2022.

GDP is expected to decline materially in the September quarter and the unemployment rate will move higher over coming months, the bank said.

The board repeated that it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range. The central scenario for the economy is that this condition will not be met before 2024.

Asian markets traded mixed as investors assessed the outlook for central bank stimulus and the impact of the Delta virus strain on economic reopening.

The currency held steady against its major counterparts on Monday.

The aussie depreciated to a 4-day low of 0.7412 against the greenback, down by 0.8 percent from a 4-day high of 0.7469 seen at 12:30 am ET. The pair had finished Monday's deals at 0.7440. Immediate support for the aussie is likely seen around the 0.72 level.

The aussie lost 0.7 percent to reach a 4-day low of 81.39 against the yen, after rising to a 4-day high of 81.99 at 12:30 am ET. The pair was valued at 81.69 when it ended trading on Monday. Should the aussie falls further, it is likely to test support around the 80 region.

Having climbed to nearly a 4-week high of 1.5909 at 12:30 am ET, the aussie turned lower and slipped 0.7 percent to a 4-day low of 1.6017. The euro-aussie pair was quoted at 1.5945 at Monday's close. Further fall in the currency may challenge support around the 1.62 level.

The aussie eased off to 1.0417 against the kiwi, following nearly a 2-week rise to 1.0453 at 12:30 am ET. Extension of the aussie's downtrend may take it to a support around the 1.03 region.

The aussie fell to a 4-day low of 0.9298 against the loonie, after touching 0.9352 at 12:30 am ET, which was its biggest level since July 20. The aussie had finished yesterday's trading session at 0.9322 against the loonie. Next key support for the aussie is likely seen around the 0.91 level.

Looking ahead, Eurozone GDP data for the second quarter and German ZEW economic sentiment for September are due out in the European session.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT