Aussie Dollar Approaches 2024 High as China Cuts Rates Ahead of RBA – Reuters

By Kevin Buckland

TOKYO – The Australian dollar remained near its highest level of the year on Tuesday, as the central bank was expected to maintain its current policy. Traders were particularly focused on any signals regarding potential near-term easing.

Support for the currency was bolstered by stimulus measures from the People’s Bank of China, which resulted in a slight decline for the yuan in offshore trading.

The Japanese yen stayed within recent ranges against the dollar as market participants awaited a speech from Bank of Japan Governor Kazuo Ueda. His remarks could offer insights into the anticipated pace of interest rate hikes, particularly after the central bank indicated it was in no hurry to adjust rates.

The euro made attempts to recover after a nearly 0.5% drop the previous day, driven by weak business activity surveys that suggested possible additional rate cuts.

The British pound hovered near a 2.5-year high, following a more hawkish stance from the Bank of England compared to the Federal Reserve and the European Central Bank.

As of 0212 GMT, the Australian dollar rose to $0.6839, extending a 0.45% increase from the previous session, where it reached $0.6853 for the first time since late December.

The Reserve Bank of Australia (RBA) is widely expected to keep interest rates steady on Tuesday, though economists and traders have divergent views about the likelihood of rate cuts later this year. A recent survey indicated that only four out of 44 economists predicted a reduction by the end of December, while traders estimated a roughly 60% chance of a cut.

In a related development, the Governor of the People’s Bank of China, Pan Gongsheng, announced a 50 basis point cut to banks’ reserve requirements and hinted at further easing in key lending rates.

"This is a significant easing move from China," said Tony Sycamore, a market analyst. He added that after the RBA’s announcement, the Australian dollar could strengthen further, potentially reaching 70 U.S. cents by year-end.

Following the announcement, the yuan initially weakened by about 0.16% in offshore trading but eventually stabilized around 7.0590 per dollar.

The Japanese yen rose slightly to 143.495 per dollar but remained within its September trading range of 147.20 to 139.58, following a recent high reached on September 16.

The yen has been under pressure amid decreasing expectations for aggressive tightening by the Bank of Japan, especially after Governor Ueda expressed a cautious outlook regarding global growth risks.

The euro was stable at $1.1105. A survey from S&P Global revealed a sharp contraction in euro zone business activity this month, with stagnation in the service sector and an acceleration in the downturn of manufacturing.

Sterling remained unchanged at $1.33445, following the Bank of England’s decision to maintain interest rates last Thursday, with the governor emphasizing the need for caution in considering future cuts.