SINGAPORE- The US dollar was steady near a three-month peak on Tuesday on rising expectations the Federal Reserve is unlikely to cut rates aggressively this year, while the Australian dollar gained after the central bank said it could not rule out another rate hike.
The Reserve Bank of Australia left rates unchanged at a 12-year high of 4.35 percent , as expected, after its February meeting, but cautioned that a further increase in interest rates might be needed to tame inflation.
Investors have steadily moved to push back bets for the first rate cut from the RBA to August, rather than June, with economists polled by Reuters also expecting the central bank to stay steady on rates well into the second half of this year.
The Aussie rose 0.35 percent to $0.6505 after the decision, having touched a two-and-a-half month low of $0.6469 on Monday. The New Zealand dollar was 0.19 percent higher at $0.60665.
“It totally makes sense for the RBA to retain hawkish bias, given the pushback to easing expectations we have seen lately from the Fed, ECB and other major central banks,” said Charu Chanana, head of currency strategy at Saxo in Singapore.
“Bearish AUD picture remains intact, given the lags in RBA pricing compared to that of the Fed, as well as the broader downbeat China picture.”
Meanwhile, the dollar index which measures the US currency against six rivals, was at 104.38, having touched 104.60 on Monday, its highest since Nov. 14. The index is up 3 percent for the year so far after dropping 2 percent in 2023.
Data on Monday showed US services sector growth picked up in January as new orders increased and employment rebounded, indicating a strong start to the year for the economy and comes after a blowout jobs report last week.
