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Business Recorder
3 days ago
- Business
- Business Recorder
Aussie, kiwi gain as tariff risks drag on dollar
SYDNEY: The Australian and New Zealand currencies gained on Monday as the US dollar weakened on an escalation in global trade tensions, though negative sentiment in equity markets could limit further gains. The Aussie rose 0.2% to $0.6449, building on a modest 0.5% gain in May. It remains to be seen if it can sustain levels above the 200-day moving average of $0.6441, a threshold it has struggled to hold for the most part of last month. The kiwi dollar also advanced 0.5% to $0.5991 in holiday-thinned trade, after finishing last month with a modest rise of 0.6%. It is facing some heavy resistance at 60 cents and support is at the 200-day moving average of $0.5872. The US dollar starts the week on the back foot after President Donald Trump threatened to double duties on imported steel and aluminium to 50% from Wednesday. He accused China of breaching agreements made during Geneva trade talks. 'The broad-based USD selling is benefiting high-beta anti-dollar currencies such as Aussie and kiwi. This may be the latest iteration of the 'sell America' trade as a response to the post-close steel tariffs announcement,' said Sean Callow, a senior analyst at ITC Markets. 'This is not the ideal fuel for AUD and NZD, however, with upside likely limited by the pullback in equity sentiment.' Down Under, the Reserve Bank of Australia will publish the minutes of its May policy meeting on Tuesday. The RBA cut interest rates to a two-year low last month and left the door open to further easing as cooling inflation at home offered scope to counter global trade risks. RBA Assistant Governor Sarah Hunter is scheduled to give a speech at 1:05 p.m. local time (0305 GMT) on Tuesday about Australia's links with the world economy.
Yahoo
18-02-2025
- Business
- Yahoo
Australia's central bank cuts rates, cautious on further easing
SYDNEY (Reuters) - Australia's central bank cut interest rates on Tuesday for the first time since the depths of the 2020 pandemic, saying progress had been made on inflation though it was still cautious about prospects of further policy easing. The first rate cut will provide some relief to borrowers and comes as good news for Prime Minister Anthony Albanese, who is facing a tough election to be held no later than May 17. Speculation is swirling that he may use the opportunity to call an early election. Markets had wagered heavily on a quarter-point cut after core inflation surprised on the downside in the fourth quarter at 3.2%. But the cautious stance sent the Australian dollar 0.2% higher to $0.6366. Swaps imply just a 20% probability for a follow-up cut in April, although a move in May is still almost fully priced in. Wrapping up its February policy meeting, the Reserve Bank of Australia (RBA) cut the cash rate by a quarter-point to 4.1%, the first reduction since November 2020 when the pandemic crisis saw rates slashed to an all-time low of 0.1%. "While today's policy decision recognises the welcome progress on inflation, the Board remains cautious on prospects for further policy easing," the board said in a statement, noting that upside risks to inflation remain due to a strong labour market "The Board's assessment is that monetary policy has been restrictive and will remain so after this reduction in the cash rate." Having already opened the door to a move in December, the board warned that if monetary policy is eased too much too soon, disinflation could stall. "At first glance the statement suggests their default position is steady in April but should be open for May, not far from market pricing," said Sean Callow, analyst at ITC Markets. The RBA has lagged its peers in the global easing cycle and Australia's cut comes as the Federal Reserve appears to be pausing its policy loosening. Across the Tasman Sea, New Zealand is poised to go with another 50-basis point cut on Wednesday. Inflation, which took off in Australia later than elsewhere, ran at 2.4% in the last quarter, back in the target band of 2-3%. The closely watched trimmed mean measure also slowed to 3.2%, from 3.6% previously, and is now expected to fall to 2.7% by June. Consumer spending has picked up thanks to the government's tax cuts and the labour market has been surprisingly resilient but not a source of inflationary pressures, all of which suggests the economy is not screaming for consecutive rate cuts. Tuesday's rate cut is also positive for the housing market where prices have actually fallen from their record levels over the past few months, but affordability issues are still a major headache for Prime Minister Albanese. Sign in to access your portfolio
