Australian Dollar Firmer as RBA Gives Little Away

 
  By James Glynn 
 

        SYDNEY--The Australian nudged higher toward US$0.7500 Tuesday after the country's central bank passed up an opportunity to strengthen expectations of a coming interest rate cut.
        At 0635 GMT, the Australian dollar was trading at US$0.7493, compared with US$0.7474 late Friday.
        Economists said Reserve Bank of Australia Gov. Glenn Stevens gave little away in comments following a morning policy meeting, in which it was decided to leave the cash rate target unchanged at a record low of 2%.
        Even volatility caused in global markets as a result of uncertainty surrounding the future of Greece in the eurozone, and recent sharp falls in Chinese share prices failed to rattle the RBA.
        "Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low," Mr. Stevens.
        Su-Lin Ong, a senior economist at RBC Capital Markets, said the RBA, had to say something about the troubling circumstances in Greece and China, but probably hadn't wanted to overstate the impact.
        "All they have done is acknowledge it, because they have to," said Ms. Ong, referring to Greece and China. "They aren't going to comment on anything that has been volatile for only a week or two."
        Many economists continue to forecast a further cut in interest rates before the end of the year as low growth, weak inflation, soft confidence levels and weak investment conspire to give the RBA a trigger.
        James McIntyre, economist at Macquarie Securities, said he didn't see anything in the Reserve bank of Australia's policy statement that suggests there is a risk of an imminent cut in August, unless there is a significant hit to confidence from developments in China and Greece over the next few weeks.
        Still, "the combination of weak investment, a high currency, low inflation and muted confidence will ultimately require additional easing," he said, adding a November rate cut remains in prospect.
        Chris Tedder, a research analyst at FOREX.com, said commodity currencies remain under pressure due to "an ongoing massacre in Chinese equity markets, which is partly responsible for 5.4% fall in the spot price of iron ore so far this week.
        China's stocks fell early Tuesday, casting doubt on the potency of Beijing's aggressive rescue efforts, while investors elsewhere in Asia appear to shrug off concerns over Greece's debt situation.
        The Shanghai Composite was down more than 3% in early trading, wiping out a rebound on Monday, with nearly 900 companies losing and fewer than 50 gaining.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 07, 2015 02:48 ET (06:48 GMT)

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