Aussie Jumps After RBA Rate Decision; Dollar/Yen At Fresh 17-Month Low

The Reserve Bank of Australia kept its cash rate unchanged at 2.0% for the 10th straight policy meeting today as was widely expected. However, the Australian dollar jumped immediately after the announcement as the accompanying statement did not signal another cut anytime soon, despite keeping the door open for such a move.

RBA Governor Glenn Stevens said in his statement that “there were reasonable prospects for continued growth in the economy” but “an appreciating exchange rate could complicate the adjustment under way in the economy”. Some analysts were expecting a more strongly-worded concern at the currency’s recent gains, and this helped the Aussie climb to 0.7631 versus the US dollar after the statement.

However, the Aussie soon fell back to slide towards intra-day lows at 0.7580.

The New Zealand dollar followed its Australian counterpart to fall to a one-week low of 0.6774 versus the greenback. The kiwi is likely to face downwards pressure ahead of the latest global dairy auction later in the day.

Commodity prices continued to drift lower, led by crude oil, as the prospects for a production freeze agreement diminish when major producers meet on April 17. US oil futures slumped by over 3% yesterday and were 0.25% weaker in today’s Asian session at $35.35 a barrel.

In Japan, a 0.4% year-on-year rebound in real wages in February provided some positive news as it was the first rise since October. Speaking earlier today, the Bank of Japan’s Governor Haruhiko Kuroda said he doesn’t think Japan is heading towards a slump. But he reiterated the Bank of Japan’s readiness for further policy easing, saying developments in financial markets would be one of the deciding factors.

The dollar fell sharply against the yen in late Asian trading, sliding to a fresh 17-month low of 110.29 yen, before rebounding slightly to 110.56 yen. Comments by Chicago Fed President Charles Evans that the risks to the US growth outlook remain on the downside only added to the dollar pressure.

The greenback’s weakness was confined to the yen though, as both the euro and the pound slipped in late Asian trading. The euro hit an intra-day low of 1.1343 dollars, while sterling touched 1.4210 dollars before both pairs bounced back slightly. The US currency was also firmer against the Canadian dollar at 1.3120.

Factory orders data out of Germany today showed monthly orders fell by 1.2% between January and February. The figures were below estimates of a 0.2% gain.

In other data coming out today, Eurozone and UK services PMI are due, along with Eurozone retail sales numbers during European Session. Later in the US session, US trade figures and the ISM non-manufacturing composite will be eyed.