The Australian dollar showed mixed trading against its major rivals in early Asian deals on Tuesday ahead of the Reserve Bank of Australia’s decision on interest rate. The central bank will announce the rate decision at 10:30 pm ET.
In a surprise move, the Reserve Bank of Australia raised its cash rate by a quarter percentage point to 4.75% on November 2 – a decision seen as “prudent” by the central bank.
However, the central bank may not follow the suit this time and market players are speculating that the RBA will keep rates on hold amid continuing concerns of the eurozone debt crisis and a slower pace of economic recovery in the U.S.
Although a certain sequence of events like employment figures and inflation expectations are picking up in the domestic economy, weaker-than-expected GDP and retail sales data will force the policy makers to stay put the cash rate at 4.75 percent for another month.
Cementing the speculation, the Reserve Bank of Australia Governor Glenn Stevens on November 25 affirmed that no further rate hikes will be imminent from the central bank for some time.
The Central Bank’s decision to raise the benchmark interest rate by a quarter percentage point earlier this month was “finely balanced,” but appropriate, although more rate hikes in the near-term are unlikely, the bank’s chief said.
Latest survey results from the Australian Industry Group showed that Australia’s construction industry contracted for the sixth consecutive month in November, with activity continuing to fall across all sectors.
The AIG Performance of Construction Index fell to 42.2 from 44.0 in October. A reading above 50 indicates expansion, while one below suggests contraction.
The Australian dollar fell to a 4-day low of 81.43 against the yen in early Asian trading on Tuesday, compared to Monday’s North American session close of 81.85. The next downside target for the aussie-yen pair is seen around the 81.10 level.
The Australian dollar that tested yesterday’s all-time high of 1.3427 against the euro around 6:45 pm ET reversed its course shortly and slipped to 1.3468 after two hours. The euro-aussie pair that finished Monday’s North American deals at 1.3448 is presently quoted at 1.3462.
The Australian dollar that reached a low of 0.9874 against the US dollar around 8:00 pm ET advanced thereafter. The aussie-greenback pair that closed yesterday’s deals at 0.9901 is presently quoted at 0.9910. On the upside, 0.994 is seen as the next likely target level for the Australian currency.
Te Australian dollar advanced to a 5-week high of 1.3032 against the New Zealand dollar in early Tuesday Asian deals, mainly due to across the board weakening of the latter. If the pair strengthens further, 1.3090 is seen as the next probable resistance. The aussie-kiwi pair that ended yesterday’s deals at 1.3006 is presently quoted at 1.3021.
Looking ahead, Japan is set to release leading and coincident indexes for October at 12:00 am ET.
German factory orders and the US consumer credit-both for October are expected in the upcoming European and New York sessions, respectively.