SINGAPORE, Nov 7 — The dollar was steady today as traders took a breather from a risk rally, while the Aussie slid after the Reserve Bank of Australia raised rates, but left the door open on whether further hikes would be needed.
The RBA raised interest rates by 25 basis points today, ending four months of steady policy, but a tweak in language regarding the outlook stoked expectations that the central bank was done with its rate hikes.
The Australian dollar fell 0.52 per cent to US$0.6474 after the decision and was last at US$0.6460, but the currency remained close to the three-month peak of US$0.6523 touched yesterday.
Commonwealth Bank of Australia’s currency strategist Carol Kong said the forward guidance was slightly watered down, which was perceived as dovish, resulting in the Aussie quickly giving back its gains after an initial knee-jerk rally.
The Aussie and the New Zealand dollar have rallied over the past few days after a benign US jobs report led markets to price in rate cuts by the middle of next year, lifting risk appetite. The kiwi was off 0.15 per cent at US$0.59545.
“With the RBA out of the way, the major determinants of AUD/USD will shift back to global. Expect focus to move back to Fed rhetoric and the resultant impacts on US Treasuries,” Kong said.
The rally in bonds and equities last week looks to be fading, with yields higher at the start of the week and the market focus switching to a flurry of US Fed officials due to speak this week.
Federal Reserve Bank of Minneapolis President Neel Kashkari said yesterday the US central bank likely has more work ahead of it to control inflation.
Fed Chairman Jerome Powell is due to speak tomorrow and Thursday, where the focal point will be on whether he maintains the more dovish tone struck after the Fed’s policy meeting last week.
“If Powell sounds a bit more hawkish to push back against the easing of financial conditions later this week ... I think the dollar can rebound,” said CBA’s Kong.
“But I think it’s still too early to say the latest easing in the dollar will be sustained. Just given that the FOMC is still unclear whether or not they wanted to hike rates further.”
Against a basket of currencies, the dollar index rose 0.085 per cent to 105.36, having climbed 0.2 per cent yesterday, but remained not far off a nearly two-month low of 104.84 touched yesterday.
The euro was down 0.07 per cent to US$1.0707, easing away from the eight-week peak of US$1.0756 hit yesterday. Sterling was last at US$1.2335, down 0.05 per cent on the day, just shy of the seven-week high of US$1.2428 it hit yesterday.
The Japanese yen was at 150.23 per dollar back above the 150-level that has kept traders on edge in recent weeks as they look for signs of intervention from Tokyo.
The yen hit 151.74 per dollar last week, edging closer to October 2022 lows that spurred several rounds of dollar-selling intervention.
Bank of Japan Governor Kazuo Ueda said yesterday the country was making progress towards achieving the bank’s 2 per cent target but not enough to end ultra-loose policy, warning of uncertainty over whether companies will keep rising wages next year. — Reuters
