Dollar falls after RBA cuts cash rate

THE Australian dollar fell by more than one third of a US cent after the central bank cut its interest rate by 0.25 per cent.

dollar

THE Australian dollar fell by more than one third of a US cent after the central bank cut its interest rate by 0.25 per cent to 3.25 per cent at its board meeting today.

The reduction takes the cash rate to its lowest point since October 2009.

The Australian dollar fell to 103.25 US cents at 2.35pm (AEST) after the rates decision was announced.

Earlier today
At 07.00 AEST on Tuesday, the currency was trading at 103.64 US cents, up from 103.60 US cents on Monday.

Bank of New Zealand currency strategist Mike Jones said positive US manufacturing data released overnight had boosted the local currency.

"We saw some key manufacturing indicators, and on balance, they've seemed less gloomy than expectations," he said.

"That's started the quarter on a relatively positive note.

"The equity market posted good gains, commodity prices were up, and a general risk-on sentiment pulled the Aussie dollar higher."

Overnight, the Institute of Supply Management in the US said its index of factory activity rose 51.5 in September, from 49.6 in August.

In China on Monday, the NBS purchasing managers' index (PMI) showed a slight rise in September to 49.8 from 49.2 in August.

Mr Jones said he expected the Australian dollar to trade sluggishly ahead of the RBA's board meeting and rate decision on Tuesday afternoon.

"The decision is shaping up to be quite crucial, so I expect the currency will track in a narrow range ahead of that," he said.

Investors are expecting the central bank to ease the cash rate from its current 3.5 per cent position, although economists are more guarded.

An AAP survey of 17 economists on Friday showed that only five are expecting a cut, although most forecast at least one cut by December.

The RBA last cut the cash rate in June - by 0.25 per cent, following a 0.5 per cent cut in May.