The Australian dollar shrugged off the Reserve Bank of Australia’s latest interest rate cut today, clawing back almost half of the value it lost yesterday, on the back of better Chinese trade data.
The local unit traded around $US1.0185 this afternoon, about 0.3 per cent above the level reached after the RBA surprised markets and cut the cash rate to a record low 2.75 per cent yesterday partly to take the heat out of the dollar’s rise.
At 5pm AEST, the local unit was trading at $US1.0201.
Peter Dragicevich, a currency strategist at the Commonwealth Bank, said Australia’s interest rate differential with other countries was still large and it was very difficult for central banks to determine the value of their currencies.
“Yesterday’s decision to cut was a surprise but the Chinese trade data has lifted the currency’s value today” he said, referring to China’s surprisingly large trade surplus.
Start of sidebar. Skip to end of sidebar.
Recommended Coverage China beats trade expectations
CHINA recorded an $US18.2bn trade surplus in April, beating expectations and reversing a rare deficit in March. End of sidebar. Return to start of sidebar.
The decision to cut rates has split economists, most of whom were expecting the Reserve Bank to wait longer before cutting or not cut.
HSBC’s chief economist Paul Bloxham said it was difficult to know what the Reserve Bank’s medium term view of the economy now was.
“Relative interest rates are only a small part of the Australian dollar’s high value” he added.
