By Ray Wee
SINGAPORE (Reuters) – The Australian and New Zealand dollars languished near multi-week lows on Tuesday after China cut several key interest rates, while the greenback was little changed awaiting fresh stimulus measures.
China surprised markets on Monday by cutting key short- and long-term interest rates for the first time since August last year, signalling its intention to boost growth in the world’s second-largest economy.
The Australian and New Zealand dollars, often used as a gauge of Aussie liquidity, were flat after falling sharply on the news in the previous trading session. The Australian dollar was trading at $0.6643 early Tuesday, while the New Zealand dollar was down 0.01% to $0.5979.
“Given the realities currently facing the Chinese economy, interest rates in 2015 and 2016 will tend to reflect more fluid and freer expression,” said Rodrigo Catril, senior currency strategist at National Australia Bank (OTC:) (NAB).
“Yesterday’s monetary easing by the People’s Bank of China was not large in scale, but it demonstrates the bank’s willingness to support the economy in tandem with fiscal policy, and is likely to support the view that a slight depreciation of the yuan would be tolerable.”
The final price was 7.2973 per dollar.
Across markets, currency movements were subdued as traders focused on U.S. and Japanese central bank meetings next week.
The euro fell 0.02% to $1.0889 and the pound also fell 0.02% to $1.2928.
Against the yen, the dollar fell 0.14% to 156.79, while the greenback was flat at 104.29.
Market reaction to US President Joe Biden’s decision to withdraw from the election race over the weekend was muted, but some of the so-called Trump trade was unwound, the dollar and US Treasury yields fell slightly and bitcoin’s rally took a breather.
“I think US politics will certainly be a big driver of market volatility as we approach the November election,” NAB’s Catril said.
“There’s still a lot that’s unclear in terms of what the candidates will offer and how the polls will change. And of course, a little bit more clarity in terms of what the key policies and priorities will be will be very important for the markets.”
Among cryptocurrencies, Bitcoin fell 0.7% to $67,665, retreating from its highest level in over a month hit in the previous session.
