Rate Cut And Oil Slump Hurt AUD

Overall, there is scope for a tentative corrective recovery in the Australian dollar, but it will be tough to break back above the 0.85 level against the dollar in the near term.

The Australian dollar was unable to sustain a corrective recovery on Monday and weakened back to the 0.85 region against the US dollar.

The Reserve Bank cut interest rates by 0.25% to 7.00% following the latest policy meeting, in line with market expectations. The statement from the bank was slightly tougher than expected which provided some immediate relief to the Australian currency. Selling pressure quickly returned and the Australian dollar weakened to new lows near the 0.84 level in European trading.

The Australian currency was undermined by a renewed decline in commodity prices. The currency will also be unsettled by fears over the housing sector as there was a further 2.3% monthly decline in building approvals.

Commodity prices remained a key market influence and the Australian dollar weakened to lows below 0.83 against the US currency as il prices came under heavy selling pressure.

Investica
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