2021.08.0307:10:00UTC+00Australian Dollar Firms As RBA Retains Cash Rate; Sticks With QE Tapering Plan

The Australian dollar spiked up its major trading partners in the Asian session on Tuesday, after the Reserve Bank of Australia left its cash rate unchanged and decided to continue with its plan to scale back the bond purchase program despite a recent surge in the Delta variant of COVID-19 cases and an extended lockdown in Sydney.

The policy board of the RBA headed by Governor Philip Lowe decided to leave its cash rate unchanged at a record low of 0.10 percent.

The board maintained the target of 10 basis points for the April 2024 Australian Government bond.

The board also decided to continue to purchase government securities at the rate of A$5 billion a week until early September and then A$4 billion a week until at least mid November.

The bank affirmed that it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range. The central scenario for the economy is that this condition will not be met before 2024.

Most Asian markets fell as the spread of the Delta variant across the region sparked concerns that the economic growth will weaken again.

The aussie rose against its most major peers on Monday, as strong economic data from the United States and Europe and progress on a U.S. infrastructure spending bill lifted investor sentiment. It gained 0.2 percent against the greenback and 0.3 percent against both the euro and the kiwi for the day.

The aussie added 0.7 percent to a 5-day high of 0.7408 against the greenback. The pair had finished Monday's deals at 0.7358. The aussie is likely to challenge resistance around the 0.76 region, if it gains again.

The aussie gained 0.6 percent against the yen, approaching a 4-day high of 80.92. The pair was valued at 80.41 when it ended trading on Monday. Further rally in the currency may find resistance around the 82 region.

Data from the Ministry of Internal Affairs and communications showed that consumer prices in the Tokyo region fell 0.1 percent on year in July.

That was in line with expectations following the flat reading in June.

The aussie was 0.5 percent higher against the euro, at a 5-day high of 1.6034. The euro-aussie pair was quoted at 1.6115 at Monday's close. Should the aussie strengthens further, it is likely to test resistance around the 1.57 region.

The aussie climbed to a 6-day high of 0.9272 against the loonie, up by 0.7 percent from Monday's closing quote of 0.9205. Next near term resistance for the currency could be possibly seen around the 0.96 level.

The Australian currency appreciated to 1.0564 against the kiwi, heading towards a 5-day peak of 1.0566 seen earlier in the session. The aussie had finished yesterday's trading session at 1.0554 against the kiwi. The aussie may locate resistance around the 1.075 mark.

Looking ahead, Swiss SECO consumer confidence index for the third quarter and Eurozone PPI for June are due in the European session.

U.S. factory orders for June will be released at 10.00 am ET.