Top Stories
Aussie, kiwi dollars struggle on China’s rate cuts; dollar adrift
Global Banking and Finance Review
Company
By Rae Wee
SINGAPORE (Reuters) – The Australian and New Zealand dollars languished near multi-week lows on Tuesday after China’s move to cut several key interest rates, while the dollar was little changed as it awaited fresh impetus.
China on Monday surprised markets by cutting major short and long-term interest rates in its first such broad move since last August, signalling intent to boost growth in the world’s second-largest economy.
The two Antipodean currencies, often used as liquid proxies for the Chinese yuan, were flat after slumping in the previous session in the wake of the news. The Australian dollar was trading at $0.6643 early on Tuesday and the New Zealand dollar dipped 0.01% to $0.5979.
“For the Aussie and the kiwi, they tend to be reflecting a more liquid and free expression in terms of the realities currently facing the Chinese economy,” said Rodrigo Catril, senior FX strategist at National Australia Bank (NAB).
The easing coming from the PBOC yesterday is not huge in terms of magnitude, but it does signal that willingness for the PBOC to support the economy alongside the fiscal side, and that probably plays to the view that there will be some tolerance for a little bit of weakness in CNY.
The offshore yuan last stood at 7.2973 per dollar.
In the broader market, currency moves were subdued as traders looked to central bank meetings in the U.S. and Japan next week.
The euro eased 0.02% to $1.0889, while sterling similarly fell 0.02% to $1.2928.
Against the yen, the dollar edged 0.14% lower to 156.79. The dollar index was flat at 104.29.
The market reaction to U.S. President Joe Biden’s decision to bow out of the election race over the weekend was muted, though there was some unwinding of the so-called Trump trade, which has seen the dollar and U.S. Treasury yields ease a touch, while bitcoin’s rally hit a pause.
“I think certainly the U.S. politics, as we get closer to the November election, will become a greater source of volatility for markets,” said NAB’s Catril.
“There’s still a lot of water to go through in terms of what the candidates have to offer and also how the polling may change as well. And then of course, getting a bit more clarity in terms of what the key policies will be and priorities will be, will be very important for markets.
In cryptocurrencies, bitcoin fell 0.7% to $67,665, retreating from an over one-month top hit in the previous session.
(Reporting by Rae Wee; Editing by Stephen Coates)
Foreign currency refers to any currency that is not the official currency of a particular country. It is often used in international trade and investment.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and economic conditions.
Financial markets are platforms where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives. They play a crucial role in the economy by facilitating capital flow.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
Explore more articles in the Top Stories category
