Australian dollar falls as resource prices weigh

The Australian dollar was lower today as concerns over commodity prices such as gold took some steam out of the currency.

The Australian dollar was lower today as concerns over commodity prices such as gold took some steam out of the currency.

The Australian dollar was trading at US73.74c at 4.55pm, down from US74.26c late yesterday.

Overnight, gold dropped 1.1 per cent to $US1092 an ounce, while oil fell 3.4 per cent to $US49.13 a barrel. Copper, down 1.9 per cent, was also near a six-year low.

“The commodity-price mood remains unhelpful, encouraging positioning for a test of US70c to US72c over coming months,” Westpac currency strategist Sean Callow said.

Still, Mr Callow said there was no need for panic in the market.

Comments by Reserve Bank of Australia Governor Glenn Stevens yesterday that interest-rate cuts remained on the table were noted by the market, but so too were his qualifications of the remark.

Mr Stevens also told a charity luncheon that risks of financial instability might grow if interest rates were lowered again.

The RBA’s cash rate has been cut twice this year as the economy has slowed in the face of falling commodity prices. Markets expect one more cut.

Australia’s second-quarter inflation data this week was also benign, but most economists said it didn’t suggest an urgent need to lower interest rates at the RBA’s next policy meeting in early August.

“Those looking for RBA easing aren’t likely to find much inspiration in the calendar in the week ahead,” Mr Callow said.

Earlier, the Australian dollar fell sharply against the New Zealand dollar as the Reserve Bank of New Zealand announced a 0.25 percentage point interest-rate cut, disappointing expectations by some that it would cut by 0.50 percentage points.

All 16 economists polled by The Wall Street Journal expected the central bank to cut the benchmark cash-rate target to at least 3 per cent, though several said a 0.50-percentage-point cut was also possible.

The RBNZ also modified its language around the New Zealand dollar, possibly contributing to its strength. Governor Graeme Wheeler said the New Zealand dollar had “declined significantly” since April, which is helping to ease monetary conditions.