Aussie Trends Weaker Ahead Of RBA, Market Assess US Equity Rout
The Aussie fell in Asia on Tuesday ahead of the latest central bank review on rates and after a market rout overnight in the US that saw the S&P 500 down more than 4% and the dollar index post a gain.
AUD/USD was last quoted at 0.7880, while USD/JPY changed hands at 109.09. EUR/USD traded at 1.2370 and GBP/USD at 1.3961.
The Reserve Bank of Australia releases its February rate review with analysts expecting a steady 1.50% for the cash rate. Australia also reports the trade balance with an A$250 million surplus seen for December and retail sales with a 0.2% increase seen on month in December and a 0.8% gain expected on quarter.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.58% to 89.56.
The Dow Jones Industrial Average closed lower at 24345.68. The S&P 500 closed 4.10% lower, while the Nasdaq Composite closed at 6967.53, down 3.78%. The Dow Jones tumbled as much as 1,600 points to its lowest since Nov. 28.
Overnight, the dollar rose against a basket of major currencies as investors cheered bullish economic data pointing to underlying strength in the US economy. ISM nonmanufacturing data for January showed an uptick to 59.9, beating expectations of 56.5.
The services sector is critical component of the US economy, accounting for roughly 80% of U.S. private-sector gross domestic product (GDP).
Analysts said the strong ISM reading was indicative of strong economic activity, which could strengthen further should tax-reform measures lead to a solid rise in consumption.
Also supporting the dollar was a slump in the pound following UK purchasing manufacturing index data that fell short of expectations. While the euro moved off lowed against the greenback following comments from European Central Bank governor Mario Draghi who confirmed the euro area economy was expanding and inflation remained on track to meet the central bank's target of close to 2%.
The loonie came under pressure following reports that North American Free Trade (NAFTA) negotiations turned sour after reaching an impasse over dairy trade