US dollar extends losses to two-week trough on financial stability concerns

The Australian dollar tumbled on Tuesday against a basket of major rivals, resuming losses against the US counterpart after a short hiatus and becoming the worst performing G8 currency after the RBA’s rate cut.

The Reserve Bank of Australia voted to cut interest rates by 25 basis points to 3.85%, the lowest since May 2023, as inflation cooled.

The Price

The AUD/USD price fell 0.5% today to $0.6424, with a session-high at $0.6459.

The Aussie rose 0.85% on Monday against the dollar, the first profit in four days after the US credit rating cut.

Losing Currencies 

The Aussie is leading the losing currencies today, with a 0.5% drop on the greenback, and a 0.6% dip against both the pound and the euro. It fell 0.55% against the Swiss franc, and 0.4% against the Canadian dollar.

RBA

The Reserve Bank of Australia voted to cut interest rates by 25 basis points to 3.85%, the lowest since May 2023, and the second such cut since the start of the policy easing cycle in February.

The decision was in line with expectations and aims at boosting the economy through policy easing as inflationary pressures receded.

The bank noted that any additional rate cuts this year will heavily depend on data and economic developments.

The bank expects inflation to drop and unemployment to tick higher to the pressures on the global trade tension. 

Currently, the market is estimating 57 basis points of total rate cuts by the RBA this year.