Australian Dollar Rises After RBA Rate Decision

(RTTNews) - The Australian dollar strengthened against other major currencies in the Asian session on Tuesday, after the Reserve Bank of Australia retained its interest rate, as widely expected, after lowering it in August.

The board, headed by Michele Bullock, decided to hold the cash rate at 3.60 percent, the lowest since March 2023.

Previously, the bank reduced the rate by 25 basis points each in August, May and February.

"With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to maintain the cash rate at its current level at this meeting," the bank said in a statement.

Policymakers said they remain alert to the heightened uncertainty about the outlook and the policy is well placed to respond decisively to global developments.

At a press conference held after the meeting, RBA Bullock stated that inflation is not abating and that several of the monthly CPI's components were slightly higher than anticipated. Bullock continued, "We will have additional data in November and are not providing forward direction."

In other economic news, data from the National Bureau of Statistics showed that the manufacturing sector in China continued to contract in September, albeit at a slower pace, with a manufacturing PMI score of 49.8. That beat expectations for a score of 49.6 and is up from 49.4 in August.

The bureau also said that its non-manufacturing sector came in right on the line, stagnant at 50. That missed expectations for 50.3, which would have been unchanged.

The composite index came in at 50.6, up marginally from 50.5 a month earlier. Data from the Reserve Bank of Australia showed that private sector credit in Australia was up 0.6 percent on month in August, in line with expectations and easing from 0.7 percent in July. On an annual basis, private sector credit was up 7.2 percent.

Individually, housing credit rose 0.6 percent on month and 6.1 percent on year, while personal credit added 0.5 percent on month and 4.1 percent on year and business credit was up 0.6 percent on month and 9.9 percent on year.

Broad money advanced 0.6 percent on month and 6.8 percent on year.

The Asian stock markets also traded higher following the broadly positive cues from Wall Street overnight, amid increasing expectations of a U.S. Fed interest rate cut next month after recent data showed US consumer price inflation rose in line with estimates in August. Concerns about a potential partial U.S. government shutdown are weighing on market sentiment.

Traders also seemed reluctant to make more significant moves ahead to the release of the closely watched US monthly jobs report and US consumer confidence data on Friday, which could impact the outlook for interest rates.

According to CME Group's FedWatch Tool, investors are betting on an 89.3% chance of a 25 basis point interest rate cut at the Fed's October 28-29 meeting.

Starting October 1, the U.S. government may go into a partial shutdown as Democrats and Republicans are locking horns over allowing temporary funding required to run the machinery, with the threat of essential services being disrupted across the US.

In the Asian trading today, the Australian dollar appreciated to a 3-year high of 1.1414 against the NZ dollar, from yesterday's closing value of 1.1381. The aussie may test resistance near the 1.15 region.

Against the U.S. dollar and the yen, the aussie advanced to a 6-day high of 0.6609 and a 5-day high of 98.15 from Monday's closing quotes of 0.6579 and 97.76, respectively. If the aussie extends its uptrend, it is likely to find resistance around 0.67 against the greenback and 99.00 against the yen.

Against the euro and the Canadian dollar, the aussie climbed to near 2-week highs of 1.7743 and 0.9195 from yesterday's closing quotes of 1.7833 and 0.9155, respectively. The next possible upside targets for the aussie are seen around 1.76 against the euro and 0.92 against the loonie.

Looking ahead, U.S. Redbook report, U.S. house price index for July, U.S. Chicago PMI for September, U.S. Consumer Board's consumer confidence for September and U.S. Dallas Fed services index for September is slated for release in the New York session.