Australian dollar rises as China cuts 14-day rate, RBA seen as hawkish
SYDNEY, Sept 23 (Reuters) -The Australian dollar charged higher on Monday as China unexpectedly trimmed the 14-day repo rate, while also drawing support from expectations of a hawkish policy decision on rates from its central bank.
The Aussie rose 0.3% to $0.6830 AUD=D3, just a touch below a nine-month top of $0.6839 hit on Thursday. It gained 1.5% last week, with major resistance at the $0.6871 peak from December last year.
It also outperformed against the Japanese yen, which has been weighed down by dovish comments that the Bank of Japan is in no rush to raise rates again. The Aussie AUDJPY=R rose 0.6% to 98.50 yen, the highest in three weeks, having surged 3.4% last week.
The kiwi dollar was 0.1% higher at $0.6241 NZD=D3, having risen 1.3% last week. Resistance is around $0.6268 and the August top at $0.6298.
China surprised many on Monday by lowering its 14-day repo rate by 10 bps, days after disappointing markets by not cutting longer-term rates.
The Australian dollar is viewed by investors as a liquid proxy for the Chinese yuan, given China is the largest trading partner of Australia. Any easing steps to boost the Chinese economy is good for sentiment for the Aussie.
The two antipodeans have been on a tear recently as the U.S. Federal Reserve kick-started its easing campaign last week by an outsized 50 basis point cut, boosting global risk assets and undermining the U.S. dollar.
Next up for the Aussie is a policy decision from the Reserve Bank of Australia on Tuesday where it is widely expected to hold rates steady at 4.35% and again push back talk of rate cuts this year.
A strong jobs report last week led investors to scale back the chance of a rate cut in December to just 64%, compared to 75% before the data.
"RBA's communication and the run of data since the bank's August meeting provide no compelling reason for a shift in stance at September's meeting," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
"We expect the market to gradually price out any odds of an RBA rate cut this year. The data does not demand it," he said.
A day after the RBA meeting, inflation data for August is expected to show that headline inflation eased back to the target band of 2%-3%, driven by the government's electricity rebates, with economists expecting an annual rise of 2.7%.
However, underlying inflation could be sticky, keeping the RBA on its toes.
Reporting by Stella Qiu; Editing by Muralikumar Anantharaman
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