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Aussie Extends Downward Rally Versus U.S. Dollar After RBA Talks Down Rate-hike Prospects

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Oct, 03rd 06:57

Australian dollar continued to trade lower against its American counterpart on Tuesday after the nation’s central bank decided to leave its rate on hold. Meanwhile, the greenback has been supported amidst optimism that the Federal Reserve will raise rates at the end of this year.

The Aussie slipped more than 0.2 percent to trade at $0.7808 in early European trading session, heading for the seventh daily decline in the last nine trading days. As widely expected, the Reserve Bank of Australia kept its benchmark interest rate unchanged at a record-low 1.5%, where it has remained since August 2016.

The currency deepened declines versus major rivals after Governor Philip Lowe gave no indication that the central bank is prepared to hike rate anytime soon given high household debt and weak wages growth. Mr. Lowe also warned that the appreciation of the Aussie which recently traded near two-year highs may hold back both economic recovery and prospect of inflation moving towards the RBA’s goal target of 2 percent.

Whereas, the U.S. dollar extended its rally against its peers with the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, up 0.13 percent to 93.75, its highest since August 17. Upbeat U.S. manufacturing data released on Monday, which indicated that U.S. of manufacturing activity climbed to a 13-month high of 60.8 in September, helped boost chances for a December rate hike by the Federal Reserve and the dollar.

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