2023.02.0706:28:00UTC+00Australian Dollar Firms As RBA Hikes Rate By 25 Bps; Signals More Increases

The Australian dollar spiked up against its major counterparts in the Asian session on Tuesday, as the Reserve Bank of Australia raised its benchmark rate by a quarter-point and signaled further hikes amid growing price pressures.

The RBA board decided to lift the cash rate target by 25 basis points to 3.35 percent.

The interest rate on Exchange Settlement balances was also raised by 25 basis points to 3.25 percent.

RBA Governor Philip Lowe said further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.

Data from the Australian Bureau of Statistics showed that Australia posted a seasonally adjusted merchandise trade surplus of A$12.237 billion in December. That was shy of expectations for a surplus of A$12.500 billion and down from A$13.201 billion in November.

The currency showed mixed trading against its major counterparts on Monday. While it fell against the greenback and the kiwi, it held steady against the euro. Versus the yen, it rose.

The AUD/JPY pair climbed to a 5-day high of 91.94 from yesterday's close of 91.24. Should the aussie strengthens further, it is likely to test resistance around the 94.00 region.

Data from the Ministry of Internal Affairs and Communications showed that Japan household spending fell 1.3 percent on year in December. That missed forecasts for a decline of 0.2 percent following the 1.2 percent annual drop in November.

The AUD/USD pair rose to a 4-day high of 0.6951 from Monday's closing of 0.6882. The aussie is seen facing resistance around the 0.72 area.

The AUD/CAD pair moved up to a 4-day high of 0.9319 from yesterday's closing quote of 0.9252. Further rally in the currency may challenge resistance around the 0.96 level.

The aussie was higher against the euro, at a 4-day high of 1.5448. The euro-aussie pair was quoted at 1.5572 at Monday's close. The aussie may face resistance around the 1.49 region, if it gains again.

The aussie firmed to a 6-day high of 1.0986 against the kiwi from a 4-day low of 1.0906 logged at 8:40 pm ET. The aussie had finished yesterday's trading session at 1.0909 against the kiwi. Immediate resistance for the aussie is likely seen around the 1.12 level.

U.S. and Canadian trade data and U.S. consumer credit for December are scheduled to be published in the New York session.

At 12:40 pm ET, Federal Reserve Chair Jerome Powell will participate in a moderated discussion at the Economic Club of Washington DC.