Australian Dollar Rises After RBA Lowers Rates Less Than Seen

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The Australian dollar rebounded against the greenback after the central bank lowered interest rates by 0.25 percentage point to 3 percent, a smaller reduction than traders anticipated. New Zealand’s currency slipped.

Governor Glenn Stevens trimmed borrowing costs to a 49-year low, extending the most aggressive cycle of cuts and joining policy efforts worldwide that he said “should help contain the downturn.” Traders had bet the bank would reduce the benchmark by at least 0.5 percentage point, according to a Credit Suisse index. New Zealand’s dollar ended four days of gains versus the U.S. currency after business confidence slid to a 35-year low.

“For the Aussie the big risk was if there was a 50 basis point cut and that would have undermined it,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. “We’ll revert back to what’s been the main driver of the Australian dollar which is the performance of stocks and commodities.”

The Australian currency advanced 0.1 percent to 71.46 U.S. cents as of 4:25 p.m. in Sydney from 70.82 cents before the decision was announced and 71.39 cents late in New York yesterday. It traded at 71.75 yen from 71.47 yen before the announcement. New Zealand’s dollar slid 1 percent to 58.27 U.S. cents and dropped 1.5 percent to 58.53 yen, compared with yesterday.

From Bloomberg News.