Australian dollar higher amid hopes of China rate cut

THE Australian dollar is higher after a batch of weak China economic data in recent weeks.

On Tuesday morning, the dollar was trading at 91.31 US cents.

THE Australian dollar has hit a new three-month high as speculation grows that the Chinese central bank will have to give its economy a boost.

At 0700 AEDT on Tuesday, the local unit was trading at 91.31 US cents, up from 90.90 cents on Monday.

Early on Tuesday morning, the currency peaked at 91.52 US cents, its highest level since December 11.

A bout of weak economic data from China in recent weeks could result in the People’s Bank of China (PBOC) to cut its reserve requirement ratio (RRR) - reducing the amount of cash that banks must hold in reserve.

OM Financial senior client adviser Stuart Ive said the combination of easier monetary policy in China and tighter monetary policy in Australia had helped push the Aussie dollar higher. “It’s crept into the market that the Chinese will do something to stimulate it’s economy,” he said.

“That’s combined with the expectation that the Reserve Bank of Australia may raise its rate by the end of the year.” Mr Ive said it looked possible that the Australian dollar could move higher and could get to 92 US cents.

“The biggest fear holding back these markets is any type of risk aversion created by the Crimean situation,” he said.

“But, at this moment, it doesn’t look like the situation will deteriorate and if that’s so we will see the Australian dollar nudging higher each day.” On Tuesday afternoon RBA deputy governor Philip Lowe will give a speech to the Australian Securities and Investment Commission conference in Sydney.

Mr Ive said the speech will be of interest to currency markets if Dr Lowe comments on the level of the Australian dollar or the cash rate outlook.

He said he expects the Australian dollar to trade in a range between 91.10 and 91.55 cents on Tuesday.