Australian Dollar Retreats Despite RBA Interest Rate Decision

(RTTNews) - The Australian dollar retreated against other major currencies in the Asian session on Tuesday, even after the Australia's central bank raised its benchmark rate by a quarter-point, after holding the rate for four straight meetings. Meanwhile, traders bet that the tightening cycle of RBA is over.

The policy board of the Reserve Bank of Australia headed by Michele Bullock decided to lift the cash rate target by 25 basis points to 4.35 percent. The bank also increased the interest rate paid on Exchange Settlement balances by 25 basis points to 4.25 percent.

The bank had held interest rates steady since June following an increase of 4 percentage points since May last year.

"The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe," Bullock said.

Although inflation has passed its peak, it is still too high and is proving more persistent than expected a few months ago, the bank noted. Inflation is forecast to be around 3.5 percent by the end of 2024 and at the top of the target range of 2-3 percent by the end of 2025.

In economic news, data from the General Administration of Customs showed that the annual decline in exports of China worsened to 6.4 percent in October from 6.2 percent in September. This was much bigger than the expected drop of 3.3 percent. On the other hand, the China imports grew 3.0 percent from a year ago, reversing a 6.2 percent drop in September. As a result, the trade surplus fell to $56.5 billion in October from $77.7 billion in September.

In the Asian trading today, the Australian dollar fell to a 6-day low of 1.6589 against the euro, from a recent high of 1.6476. The aussie may test support near the 1.68 region.

Against the U.S. and the Canadian dollars, the aussie slipped to 4-day lows of 0.6455 and 0.8851 from recent highs of 0.6502 and 0.8908, respectively. If the aussie extends its downtrend, it is likely to find support around 0.62 against the greenback and 0.87 against the loonie.

The aussie dropped to a 4-day low of 96.92 against the yen, from a recent nearly a 6-month high of 97.59. On the downside, 94.00 is seen as then next support level for the aussie.

Moving away from a recent 4-day high of 1.0900 against the NZ dollar, the aussie edged down to 1.0851. The aussie is likely to find support around the 1.09 region.

Looking ahead, HCOB construction PMI reports from eurozone and various European economies for October, Eurozone PPI for September and U.K. BBA mortgage approvals data for October are due to be released in the European session.

In the New York session, Canada and U.S. trade data for September, U.S. used car prices data for October, U.S. Redbook report and New Zealand Global dairy trade price index are slated for release.

At 9:15 am ET, Federal Reserve Vice Chair for Supervision Michael Barr will participate in "Financial Technology" discussion before a 7th Annual D.C. Fintech Week event, in Washinton D.C., U.S.

At 9:50 am ET. Federal Reserve Bank of Kansas City President Jeffrey Schmid will give opening keynote before hybrid "Energy and the Economy: Reshuffling the Energy Deck" conference co-hosted by the Federal Reserve Bank of Kansas City, in Oklahoma City, U.S.

At 10:00 am ET, Federal Reserve Board Governor Christopher Waller will deliver a speech on "Using Economic Data to Understand the Economy" before the Federal Reserve Bank of St. Louis Conference: "Beyond the Numbers 2023, in St. Louis, U.S.

At 1:30 pm ET, Federal Reserve Bank of Dallas President Lorie Logan will participate in fireside chat before hybrid "Energy and the Economy: Reshuffling the Energy Deck" conference hosted by the Federal Reserve Bank of Kansas City and the Federal Reserve Bank of Dallas, in Oklahoma City, U.S.