The Australian dollar was in limbo on Tuesday after the Reserve Bank of Australia (RBA) offered no fresh guidance on its rate outlook, while the New Zealand dollar edged up on better economic data. The Australian dollar was only slightly higher at $0.7122, having skidded 0.8 percent on Monday. It remained close to a 6-1/2 year trough of $0.7044 set last week. Immediate support was found around $0.7100.
As expected, the RBA left the cash rate at a record low of 2.0 percent at its monthly policy meeting, where it has been since May. The central bank appeared comfortable with the level of the local dollar, reiterating that it is "adjusting to significant declines in key commodity prices." It also noted a recent spike in global stock market volatility triggered by "developments in China", but offered no insights.
"The main surprise is that despite all the volatility in financial markets over the last few weeks and the heightened worries over China, there is not more reference to that," said Shane Oliver, chief economist at AMP Capital Investors. Interbank futures eased a touch but were still pricing in a 25-basis point-cut by early next year, largely because of risks of a hard landing in China. In contrast, the New Zealand dollar was a clear outperformer, up 0.6 percent on the day to $0.6379. Much of the gains came after data showed an increase in the price of exports in the second quarter, driven by a quarterly rise in dairy prices.
New Zealand government bonds rose, pushing yields two basis points lower along the yield curve. Australian government bond futures were also a bit firmer, with the three-year bond contract steady at 98.230. The 10-year contract added 3 ticks to 97.3350.
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