The dollar hung fire today ahead of several central bank meetings this week, while the Australian dollar erased early gains after its central bank raised rates but left investors pondering the timing of its next move.
The Australian dollar initially rose in trade thinned by a Tokyo market holiday. It then slipped after the Reserve Bank of Australia (RBA) lifted its cash rate for the second month running, taking it to 3.5 per cent from 3.25 percent as expected but leaving the market guessing if it would hike again as soon as December.
Markets were still pricing in the chance of a 25 basis point increase in December, albeit a reduced chance.
Australia became the first G20 nation to raise rates since the global credit crisis blew up and expectations of further tightening and rosier growth outlook than elsewhere have kept its dollar on a broad uptrend since March.
It was quoted at $0.9025, slightly down from $0.9042 in late US trade yesterday and eased against the yen, slipping 0.2 per cent on the day to 81.43 yen.
Commodity currencies rose early in the session after news the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India, executing half of a long-planned sale that had threatened to slow gold's rally. Gold itself rose towards a record high hit last month.
The dollar index slipped 0.2 per cent on the day to 76.115, but was holding well above October's 14-month low of 74.94.
The US Federal Reserve starts its two-day meeting today, and while it is expected to keep rates unchanged, there is speculation that it might drop or alter its pledge to keep rates low for an "extended period".
Reuters