Australian Dollar Drops On Softer RBA Rate Hike

(RTTNews) - The Australian dollar fell against its major counterparts in the Asian session on Tuesday, as the Reserve Bank of Australia delivered a smaller rate hike than expected amid uncertainty over the global economic outlook.

The policy board of the RBA, headed by Governor Philip Lowe, raised the cash rate target by 25 basis points to 2.60 percent from 2.35 percent.

The pace of rate hike was slower than the expected 50 basis point increase.

The board also increased the interest rate on exchange settlement balances by 25 basis points to 2.50 percent.

The board expects to increase interest rates further over the period ahead. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board's assessment of the outlook for inflation and the labor market, the bank said.

Data from the Australian Bureau of Statistics showed that Australia's home loans dropped a seasonally adjusted 2.7 percent on month in August, coming in at A$18.54 billion.

That exceeded expectations for a contraction of 3.5 percent following the 7.0 percent drop in July.

Separate data showed that Australia's building approvals jumped a seasonally adjusted 28.1 percent on month in August, coming in at 17,497.

That blew away expectations for an increase of 5.0 percent following the 17.2 percent decline in July.

The currency climbed against its major counterparts on Monday, except the kiwi.

The aussie fell to 0.6451 against the greenback from yesterday's close of 0.6515. The next likely support for the currency is seen around the 0.625 level.

The AUD/JPY pair reached as low as 93.46. At yesterday's close, the pair was valued at 94.18. The aussie may locate support around the 90.00 mark, should it weakens further.

The aussie edged down to 1.5230 against the euro, down from Monday's close of 1.5076. Further decline in the aussie may test support near the 1.55 level.

The aussie weakened to a 6-day low of 0.8789 against the loonie. At Monday's close, the pair was worth 0.8873. The aussie is likely to challenge support around the 0.86 mark.

The aussie touched 1.1323 against the kiwi, its lowest level in nearly 2 weeks. The aussie had finished yesterday's trading session at 1.1385 against the kiwi. Immediate support for the aussie is likely seen near the 1.10 level.

Looking ahead, Eurozone PPI for August is due in the European session.

U.S. factory orders for August will be featured in the New York session.