Aussie can't hold on to gains after interest-rate hike
By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) -- The Australian dollar got an early lift against its U.S. counterpart in Asian trading Tuesday after the Australian central bank raised interest rates as expected, but the move only briefly stalled the greenback's overall rise.
The Reserve Bank of Australia raised its policy rate by a quarter point to 4.0%, as most had expected, marking the central banks' fourth rate increase in five meetings after last month's surprise decision to stand pat. See full story on RBA rate hike.
After Tuesday's announcement, the Aussie briefly rose about 90 U.S. cents, but then quickly lost ground to profit-taking, later trading down 0.3% at 89.67 cents.
"The market is pricing in 90 basis points in the next 12 months after today's move," said Sue Trinh, senior currency strategist at the Royal Bank of Canada.
For this reason, she said in a note to clients, "we continue to favor selling" when the Australian dollar rallies, and believe it has "peaked in this cycle" against its U.S. counterpart.
The RBA's statement included a reference to recent debt woes in Europe.
"Concerns regarding some sovereigns remain elevated," RBA Gov. Glenn Stevens said in a statement after the rate decision.
The dollar index (DXY 81.02, +0.36, +0.44%) , which measures the greenback against a trade-weighted basket of six major currencies, rose to 81.011, from 80.753 in late North American trading Monday.
The dollar edged up to 89.23 yen, from 89.06 yen late Monday.
The euro fell to $1.3511, from $1.3562 late Monday, and the British pound skidded 0.8% to $1.4871, continuing its slide.
The pound plunged on Monday, as worries about the outcome of the U.K. general election and the ability of the government to remedy the high fiscal deficit put the currency under heavy selling pressure. Read more on British pound's drop.
On Monday, the U.S. dollar rose to its highest level versus the euro since last May and gained against other major currencies amid new reports that fellow European countries may offer financial support to Greece. See Monday's Currencies report.
