Aussie dollar steady below US76c

Investors are waiting for RBA minutes after the greenback’s strength put a lid on Aussie gains.

The Australian dollar traded lower in Asia on Monday on news of solid US economic data late on Friday, that sparked gains in the US dollar and fresh chatter around the topic of near-term US interest rate increases.

Political upheavals in Turkey also contributed to US dollar strength, with investors seeking a safe haven.

At 6.07pm (AEST), the Australian dollar was trading at US75.92 cents, compared with US76.52c late on Friday.

The focus now turns to the release on Tuesday of the Reserve Bank of Australia’s policy meeting minutes. The RBA kept rates steady at its July 5 policy meeting, but opened the door to a further rate cut saying it is awaiting incoming data.

Most economists agree that the release of second quarter inflation data on July 27 is the next major event for the Australian dollar. It was ultra-benign inflation in the first quarter that prompted the RBA’s last cut in June.

An interest rate cut in August remains Westpac Bank’s base case, with markets about 60 per cent priced in for a drop in the cash rate from 1.75 per cent to 1.50 per cent. Sean Callow, currency strategist at Westpac, said rate cut talk should help keep the Australian dollar capped around US77c for now.

But on the other hand, demand for yield should stop the Aussie from falling below US74c, he added.

The current Australian dollar rally is looking fatigued, said forex trading house OANDA.

“There will be a tendency for traders to sell into upticks on expectations that moderate inflation will lead the Reserve Bank of Australia to cut,” it said.

- Dow Jones newswires