RBA in focus, dollar steady as risk rally abates in early trade

7 Nov 2023 , 09:43 AM

The Australian dollar dipped ahead of a central bank interest rate announcement later in the day, but the dollar remained stable on Tuesday, retaining overnight gains as investors took a break from a risk surge.

The Reserve Bank of Australia is likely to hike interest rates by 25 basis points, ending a four-month policy decision-holding period. All eyes will be on them throughout Asian hours. Conversely, markets are less confident, pricing in a 63% possibility of an increase.

Although it was down 0.23% at $0.6474, the Australian dollar was still near its three-month high of $0.6523, which was hit on Monday.

The positive U.S. jobs report has caused markets to price in rate reduction by the middle of next year, which has increased risk appetite and helped the Australian and New Zealand dollars rise over the past few days. At $0.59545, the kiwi had a 0.15% loss.

With rates rising at the beginning of the week and the market’s attention shifting to a flurry of speeches by U.S. Fed officials this week, the bond and equity gain from last week appears to be abating.

Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, stated on Monday that the US central bank probably still has work to do to rein in inflation.

The main focus of Fed Chairman Jerome Powell’s scheduled speeches on Wednesday and Thursday will be on whether or not he sticks to the more dovish tone that he adopted following the Fed’s policy meeting last week.

The dollar index increased 0.057% to 105.32 against a basket of currencies on Monday after rising 0.2%. However, it was still very close to the nearly two-month low of 104.84 that was struck on Monday.

The euro eased away from the eight-week high of $1.0756 reached on Monday, closing at $1.0708, down 0.07%. The most recent price of sterling was $1.2346, down 0.04% for the day and barely below the seven-week high.

Regaining its footing above the 150-level that has unsettled markets in recent weeks as they await signals of Tokyo’s involvement, the Japanese yen fell 0.02% to 150.10 per dollar.

Last Monday, the yen fell to 151.74 per dollar, bringing it closer to the lows of October 2022 that prompted multiple rounds of dollar-selling intervention.

Governor of the Bank of Japan Kazuo Ueda warned that there was doubt over whether businesses will continue raising wages in 2019 despite the country’s progress towards the bank’s 2% target.

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