🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

FOREX-Dollar pauses, Aussie wipes out gains after RBA

Published 11/03/2009, 01:25 AM
Updated 11/03/2009, 01:27 AM
GC
-

* Aussie dollar erases gains after RBA hikes as expected

* Euro, dollar, yen broadly steady in wait for Fed, others

* Japanese markets closed for holiday

By Charlotte Cooper

TOKYO, Nov 3 (Reuters) - The dollar hung fire on Tuesday ahead of several central bank meetings this week, while the Australian dollar erased early gains after its central bank raised rates but left investors pondering the timing of its next move.

The Aussie dollar initially rose in trade thinned by a Tokyo market holiday. It then slipped after the Reserve Bank of Australia (RBA) lifted its cash rate for the second month running, taking it to 3.5 percent from 3.25 percent as expected but leaving the market guessing if it would hike again as soon as December.

"All in all, the statement remained consistent with a softly softly approach and there was absolutely no sense the RBA will become more aggressive and hike by 50 basis points any time soon," Sue Trinh, currency strategist at RBC Capital Markets in Sydney, wrote in client note.

"Indeed, there is already much speculation that a December rate hike is not a done deal."

Markets were still pricing in the chance of a 25 basis point increase in December, albeit a reduced chance.

Australia became the first G20 nation to raise rates since the global credit crisis blew up and expectations of further tightening and rosier growth outlook than elsewhere have kept its dollar on a broad uptrend since March.

It was quoted at $0.9025, slightly down from $0.9042 in late U.S. trade on Monday, and eased against the yen, slipping 0.2 percent on the day to 81.43 yen.

Commodity currencies rose early in the session after news the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India, executing half of a long-planned sale that had threatened to slow gold's rally. Gold itself rose towards a record high hit last month.

The dollar index slipped 0.2 percent on the day to 76.115, but was holding well above October's 14-month low of 74.94.

The U.S. Federal Reserve starts its two-day meeting on Tuesday and, while it is expected to keep rates unchanged, there is speculation that it might drop or alter its pledge to keep rates low for an "extended period"..

Andrew Robinson, currency strategist at Saxo Capital Markets in Singapore, said he doubted the Fed would change its tone.

"I don't think the recovery is strong enough for them to warrant that and I don't think they want to pre-empt it or cut it off in its infancy," he said.

The euro edged up 0.2 percent to $1.4795. Robinson noted the euro had risen to about $1.4845 on Monday but that level was becoming an area of resistance.

"If we can't take it out in the next couple of days then I think we're back down to the low 1.47s again," he said.

The euro also rose 0.2 percent against the yen to 133.60 yen, while the the yen was unchanged against the dollar, holding at 90.35 yen per dollar.

Markets are looking for clues from other central banks about when stimulative policy may have to come to an end.

The European Central Bank meets on Thursday. No rate change is expected and few expect it to offer clues on when it might change tack.

The Bank of England meets the same day and the market is waiting to see if it tops up its quantitative easing programme after the economy unexpectedly contracted between July and September.

"We have a slew of central bank meetings starting today. It's going to be a bit uncertain and nervous, and under the circumstances a bit of range trading," Robinson said. (Editing by Tomasz Janowski)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.