Forexpros – The Australian dollar was down more than 1% against its U.S. counterpart on Tuesday, following a larger-than-forecast interest rate cut by the Reserve Bank of Australia.
AUD/USD hit 1.0314 during late Asian trade, the pair’s lowest since April 25; the pair subsequently consolidated at 1.0313, dropping 1.10%.
The pair was likely to find support at 1.0246, the low of April 24 and resistance at 1.0429, the session high.
In a statement, the RBA said it was cutting its cash rate to 3.75% from 4.25%, the largest reduction in three years and the first rate cut since December.
Economists had been expecting a cut of 0.25%.
The central bank said in an accompanying rate statement that the rate cut was “judged to be necessary in order to deliver the appropriate level of borrowing rates”.
The statement added that in the next year or two, “inflation will probably be lower than earlier expected” and within the RBA’s target range of 2% to 3%.
The Australian dollar had found support earlier after official data showed that an index of Chinese manufacturing activity rose to a 13-month high of 53.3 in April from 53.1 the previous month, but remained slightly below expectations for a reading of 53.6.
The Aussie was sharply lower against the euro and the yen, with EUR/AUD jumping 0.19% to hit 1.2845 and AUD/JPY tumbling 1.32% to hit 82.14.
Elsewhere Tuesday, markets in Europe were to remain closed for national holidays. In the U.S., the Institute for Supply Management was to release a closely watched report on manufacturing activity.
Forexpros
