DIY Attempts
3rd February 2009, 06:55 AM
http://business.theage.com.au/business/markets/dollar-eases-back-from-rate-cut-boost-20090203-7vxl.html February 3, 2009 - 5:33PM
The Australian dollar rebounded from 10-week lows on Tuesday after the Reserve Bank lowered its key interest rate by 1 percentage point to a record low, but was not as aggressive as some had bet on.
At the close, the dollar was at $US0.6360, up from $US0.6350 before the rate decision, having jumped as high as $US0.6421.
It had fallen to a 10-week low of $US0.6248 in offshore trade as expectations of a big rate cut at home and extreme risk aversion led investors to dump the currency. It has lost over 8% so far in 2009.
The market took the view the Reserve Bank is likely slow down its rate reductions going forward, while the Aussie also found support from news of a second government stimulus package worth A$42 billion to help the economy stave off a recession.
The RBA cut its key cash rate to 3.25%, the fifth easing in six months and bringing the total reductions since September to 400 basis points.
"Our view is that with the cash rate down to 3.25%, a sharp depreciation in the currency over the last six months and now a fiscal swing of several percent of gross domestic product, the RBA will pause and see whether further cuts are useful,'' said John Edwards, chief economist HSBC.
The dollar rose from three-month lows against the yen, gaining to 57.19 yen, from 56.53 yen late on Monday. It fell to 55.51 yen offshore, not far from its record low of 55.11 yen hit in October last year.
The yen fell broadly after the Bank of Japan said it would start buying shares held by Japanese banks, helping ease some of the extreme risk aversion that has gripped global financial markets.
Australian bond futures fell after the rate decision as some investors had expected a bigger cut given recent dismal economic data from Australia's big trading partners in Asia, namely China, Japan and South Korea.
Bill futures for March fell 0.13 points to 97.23, although markets are still pricing in the cash rate to be lowered to 2.75% next month.
Three-year bond futures fell 0.130 points to 96.99, while 10-year bond futures shed 0.095 points to 95.820.
The Australian dollar rebounded from 10-week lows on Tuesday after the Reserve Bank lowered its key interest rate by 1 percentage point to a record low, but was not as aggressive as some had bet on.
At the close, the dollar was at $US0.6360, up from $US0.6350 before the rate decision, having jumped as high as $US0.6421.
It had fallen to a 10-week low of $US0.6248 in offshore trade as expectations of a big rate cut at home and extreme risk aversion led investors to dump the currency. It has lost over 8% so far in 2009.
The market took the view the Reserve Bank is likely slow down its rate reductions going forward, while the Aussie also found support from news of a second government stimulus package worth A$42 billion to help the economy stave off a recession.
The RBA cut its key cash rate to 3.25%, the fifth easing in six months and bringing the total reductions since September to 400 basis points.
"Our view is that with the cash rate down to 3.25%, a sharp depreciation in the currency over the last six months and now a fiscal swing of several percent of gross domestic product, the RBA will pause and see whether further cuts are useful,'' said John Edwards, chief economist HSBC.
The dollar rose from three-month lows against the yen, gaining to 57.19 yen, from 56.53 yen late on Monday. It fell to 55.51 yen offshore, not far from its record low of 55.11 yen hit in October last year.
The yen fell broadly after the Bank of Japan said it would start buying shares held by Japanese banks, helping ease some of the extreme risk aversion that has gripped global financial markets.
Australian bond futures fell after the rate decision as some investors had expected a bigger cut given recent dismal economic data from Australia's big trading partners in Asia, namely China, Japan and South Korea.
Bill futures for March fell 0.13 points to 97.23, although markets are still pricing in the cash rate to be lowered to 2.75% next month.
Three-year bond futures fell 0.130 points to 96.99, while 10-year bond futures shed 0.095 points to 95.820.