Australian dollar slips after cash rate cut

The Australian dollar has fallen against almost every other major currency around the globe after Tuesday’s decision by the Reserve Bank of Australia to reduce its cash rate to 3.5 per cent, a drop of 25 basis points. This is the lowest point it has been in three years and the central bank has not ruled out further easing.

Reasons given for the cut by the RBA include a subdued economic outlook because of a strong local dollar, falling export prices and the economic slowdown being experienced by China, Australia’s main trading partner.

Although investors have been offloading the Aussie dollar, further deterioration is likely to be held in check as the European Central Bank and the US Federal Reserve continue to try to find ways of stimulating their own economies.

Following a record low of A$1.1597 recorded two months ago the euro has bounced back to A$1.2603, a rise of 1.2 per cent. The Aussie was also 1 per cent down against the US dollar at $1.0252. Selling against the yen saw the Australian dollar hit 80.05 yen, the lowest it has been in four weeks.

All eyes will now be firmly focused on an Australia trading report which will show whether the contraction in China is having a major effect on the country’s exports.