The Australian dollar skidded more than one US cent to a six-year low on Tuesday and plunged more than two per cent against the yen after the Reserve Bank of Australia slashed the interest rates to a record low.
The Aussie’s drop against the yen gave the US currency a cross-trading lift against the dollar, which shed about 0.5 per cent to 117.03 yen.
Australia’s central bank has cut its cash rate a quarter point to 2.25 per cent at its policy meeting to spur a sluggish economy and keep downward pressure on its currency. A Reuters poll of 29 analysts had found 20 expected no change this week.
The Aussie dropped as far as $0.7650 from around $0.7790 before the central bank’s announcement. It was last down 1.8 per cent at $0.7663.
Against the yen, the Aussie was down 2.2 per cent at 89.72 yen, dropping below support at 90 yen for the first time since February 2014 to as low as 89.70.
“The surprise rate cut relative to consensus has seen the Aussie tumble across the board,’’ said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
Moreover, she said, Australian rate futures also rallied, showing the market is “now fully priced for a back-to-back rate cut, for another one in March,’’ which is also keeping downward pressure on the Aussie as investors position for the possibility of even lower rates ahead.
The Canadian dollar continued to get a lift against its US counterpart as recently slumping crude oil prices staged a rebound. The loonie was up 0.5 per cent at C$1.2622 per US dollar, well off a near six-year low of C$1.2800 plumbed last Friday.
Investors took profits on bearish positions as oil prices continued to rise strongly, fuelling talk that a seven-month rout has ended.
The dollar remained in familiar ranges against the yen and the euro. It has spent much of the past two weeks oscillating between 117.00 and 119.00 yen and shows little sign of re-testing December’s eight-year peak of 121.86.
The euro edged down about 0.1 per cent to $1.1328, after finding a floor at an 11-year trough of $1.1098. It has held to a $1.1262-$1.1384 range over the past few sessions.
Against the yen, the common currency slipped about 0.5 per cent to 132.68, also getting a cross-trading downdraft as the yen rallied against the Aussie, and moving back towards a 17-month trough of 130.16 touched last week.