The Australian dollar plunged 1% to $0.6660 today. The currency hit its lowest level since late December. Australia’s central bank raised its cash rate by 25 basis points to 3.60%. That is the highest increase in more than a decade. However, investors expected such a rise, which did not save the Australian dollar from falling.
The Reserve Bank of Australia took a dovish tone on further rate hikes. Officials hinted that the RBA may be nearing the end of its tightening cycle. That has also contributed to the fall of the currency. Matt Simpson, a senior market analyst at City Index, said the central bank’s statement suggests they are contemplating an end to rate hikes.
Meanwhile, the US dollar soared on Tuesday. Investors are awaiting Federal Reserve Chairman Jerome Powell’s testimony before Congress, hoping to get clues about the economic strength of the US and the Fed’s plans to raise rates. The dollar gained a lot against the Australian.
The US dollar index rose 0.25% to 104.52 today after falling 0.26% in the previous session. In addition, the euro fell 0.22% to $1.0655. At the same time, the British pound shed 0.32%, changing hands at $1.19885.
The dollar also added 0.1% against the Japanese yen at 136.05. Traders are focusing on current Bank of Japan Governor Haruhiko Kuroda’s final policy meeting. It’s for Thursday. Market participants expect the central bank to maintain its ultra-loose monetary policy.
On Tuesday, new data showed Japan’s real wages plunged the most in nearly nine years in January. Inflation, which remains the highest in four decades, weighed on consumer demand.
What about emerging market currencies?
Emerging market currencies were flat against the dollar on Tuesday. Regional stocks also declined due to weak trade data from China. The latter soured optimistic sentiment.
The Turkish lira traded in a tight range against the US dollar. Turkish opposition leader Kemal Kilicdaroglu is the main challenger to President Tayyip Erdogan in the historic elections that will take place on May 14.
Meanwhile, the South African rand fell 0.1% against the US currency. President Cyril Ramaphosa recently appointed a new electricity minister to deal with the country’s worst power outages. He also added his supporters to the cabinet. Investors expect South Africa to report its GDP growth later today. They expect moderate growth in the fourth quarter year-on-year.
The Russian ruble was flat against the dollar today. Low local market activity before a holiday also contributed to muted trading.
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