The Reserve Bank of Australia kept its cash rate unchanged at 2% on Tuesday as was widely expected. After two quarter point cuts earlier this year, the RBA has toned down its easing bias and made no mention of the need for further depreciation of the Australian dollar in its statement. Instead, the Governor Glenn Stevens said that the currency is adjusting to the fall in commodity prices.
The aussie jumped by over 1% from around 0.7288 to 0.7384 against the US dollar after the announcement, moving away from Friday’s new 6-year low. Also supporting the Australian dollar was stronger-than-expected retail sales for June. The aussie’s rally helped the kiwi move higher in Asian session as it rose to 0.6591 against the dollar.
Asian equities were mixed on Tuesday but Chinese shares indices were up by around 3% after authorities in China announced new measures to restrict short-selling, which is believed to have contributed to the sharp sell-offs in shares seen in recent weeks. Monday’s disappointing manufacturing PMI raised fresh concerns on the strength of the Chinese economy, which has pushed oil prices to 4-month lows.
Brent Crude futures were steadier on Tuesday after dropping below $50 a barrel. Prices were up by 0.4% in late Asian trading at $49.71. But the small rebound wasn’t enough to support the Canadian dollar as the loonie hit new 11-year lows against the dollar, falling to 1.3176 in late Asian session.
Gold prices also attempted a small recovery, rising to $1087.91 after hitting a low of $1080.90 earlier in the session.
The dollar was mixed on Tuesday after yesterday’s weak ISM manufacturing survey hit dollar sentiment. The greenback was steady against the yen, trading around the 124 level for much of the Asian session. The euro was steady against both the dollar and the pound, trading at 1.0958 and 0.7023 respectively. The pound moved slightly higher against the dollar, climbing to 1.5617 before easing to 1.5602.
The rest of the day is looking relatively quiet with only UK construction PMI and Eurozone producer prices to keep investors busy. Factory orders for June will be the main data coming out of the US.