BS: Dollar steady as RBA ponders rate cut CURRENCIES
THE dollar was steady late yesterday due to a dearth of fresh economic data, with traders starting to focus on the Reserve Bank policy meeting next week.
At 5pm AEST, the dollar was buying $US1.0426, up US0.13c.
Some economists believe it is increasingly likely that the RBA will cut interest rates next week in response to lower commodity prices and the high level of the dollar. Ray Attrill, currency strategist at National Australia Bank, said if the RBA did not deliver a cut in its benchmark cash rate next week, it would strengthen the dollar.
"Should the RBA fail to deliver lower rates next Tuesday, a short-term bounce in the Australian dollar, to as high as $US1.05, is a real prospect," he said. NAB expects the RBA to cut its benchmark lending rate in November from 3.5 per cent to 3.25 per cent.
A survey by Dow Jones Newswires of 15 economists shows only four expect an interest rate cut next week, even though financial markets are pricing in a 70 per cent chance of a cut. The RBA has articulated an easing bias in recent publications, highlighting weakness in key commodity prices such as iron ore and coal.
Much of the dollar's outlook will be shaped by the US dollar, with some analysts saying recent weakness in the greenback might be abating.
"The dollar's sell-off over the past few weeks has stalled as foreign exchange markets fully digest the Fed's decision to launch a new round of asset purchases," UBS said in a research note.
Earlier yesterday, the RBA published its latest review of the health of the nation's banks, reporting few problems while warning against any growth in risky lending to boost profits.
The RBA "painted a benign picture of financial exposures in Australia," UBS currency strategist Gareth Berry said.
