Australian dollar skids to 6-year low after RBA shock

 

A Sydney businessman walks into the light outside the Reserve Bank of Australia, on Tuesday. Asian stocks sagged on Tuesday amid lingering growth concerns, while the Australian dollar plumbed six-year lows after the Reserve Bank of Australia cut interest rates to a record low.

RBA cuts to record low 2.25 pct, pushing Aussie down 2 per cent; New Zealand dollar also hammered, eyes on central bank speech; Generally stronger tone to yen

The Australian and New Zealand dollars weakened further in early trade in Europe on Tuesday after a sell-off following the Reserve Bank of Australia's (RBA's) surprise decision to cut interest rates.

The outlook for both Antipodean currencies has worsened in recent weeks with concerns about growth generating expectations of generally looser monetary policy, but the RBA's decision still came as a shock to many. 

Another burst lower as Europe came on line brought the Aussie's losses on the day to more than 2 per cent. It hit an almost 6-year low of $0.7635 while the kiwi fell 1.5 per cent to $0.7185, its lowest since early 2011. 

"Its a big move and I think any bounce should be sold into," said Graham Davidson, a spot trader with National Australia Bank in London. 

"Generally when the RBA move, they tend to cut a handful of times. The feeling is of an economy where there is no source of growth, almost of despair." 

Interest will now swing to a speech by New Zealand central bank chief Graeme Wheeler on Wednesday. 

"The only currency I would buy the Aussie against is the kiwi," Mr. Davidson said. "The RBNZ has been hiking but I think they will have to backtrack on that and Wheeler may take a softer tone tonight." 

Against the yen, the Aussie was down 2.5 per cent at 89.43 yen, dropping below support at 90 yen for the first time since February 2014. 

While the euro was steady against the dollar at $1.1350 , the yen continued a recent run, rising 0.3 per cent against the dollar to 117.21. The euro, too, was down 0.25 per cent against the yen at 133 yen.

Awaiting the European Central Bank's launch of bond-buying in March, German 10-year government bond yields fell below the Japanese equivalent and a number of dealers said they saw value in the yen currently. 

"There is a feeling that the Japanese could stay on hold on any further monetary easing," said one dealer. "That is helping it and in general we had come a long long way and much attention has switched to the euro."