RBA Rate Hike Fails To Lift Australian Dollar

australiandollar may07 06sep22 lt

The Australian dollar fell against its most major counterparts in the Asian session on Tuesday, after the Reserve Bank of Australia raised its key interest rate as expected and said that the size of future hikes would be determined by the economic data and the outlook for inflation and the labor market.

The policy board of the RBA, headed by Governor Philip Lowe, decided to lift the cash rate target by 50 basis points to 2.35 percent, the highest level since late 2014.

Lowe said the board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.

The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labor market, Lowe added.

The central bank also increased the interest rate on Exchange Settlement balances by 50 basis points to 2.25 percent.

The board observed that the domestic economy is continuing to grow solidly and national income is being boosted by a record level of the terms of trade.

Caution prevailed amid a worsening energy crisis in Europe, as Russia's decision to extend a halt on gas flows through the Nord Stream 1 gas pipeline raised prospects for a recession.

The aussie held steady against its major peers on Monday, except the greenback.

The aussie edged down to 0.6777 against the greenback, from a 4-day high of 0.6833 hit at 8:45 pm ET. The pair had closed Monday's deals at 0.6793. The aussie may face support around the 0.64 region, if it falls again.

The aussie declined to 0.8894 against the loonie, after climbing to a 4-day high of 0.8951 at 9 pm ET. At Monday's close, the pair was worth 0.8924. Next near term support for the aussie is likely seen around the 0.87 level.

The aussie was down against the euro, at a 5-day low of 1.4707. The euro-aussie pair was quoted at 1.4602 at Monday's close. The aussie is seen finding support around the 1.51 mark.

The aussie pulled back to 1.1137 against the kiwi, following a 4-day high of 1.1165 seen at 1 am ET. The aussie had finished yesterday's trading session at 1.1141 against the kiwi. Further fall in the aussie may find support around the 1.08 mark.

The aussie, however, appreciated against the yen, touching a 1-week high of 96.19. The aussie is likely to face resistance around the 98.00 region.

Looking ahead, the U.S. ISM non-manufacturing PMI for August will be out in the New York session.

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