Australian dollar rallies as RBA keeps rates steady at 2.0%

04-Aug (Reuters, via CNBC) — The Australian dollar rallied on Tuesday after the Reserve Bank of Australia (RBA) surprised some by tempering its call for a lower currency, triggering a swift short squeeze.

The Australian dollar gained nearly 1 percent to a peak of $0.7356, pulling away from a six-year trough of $0.7234 set last week. It was last at $0.7349 with resistance around $0.7367, the 76.4 percent retracement of the June-July move.

The RBA said the Aussie was adjusting to significant declines in key commodity prices, but dropped a reference to further falls as being both likely and necessary.

“It suggests that maybe (the Aussie) is closer to appropriate levels,” aid Su-Lin Ong, a senior economist at RBC Capital Markets. “The fact that they have toned (it) down suggests that the easing bias, which was already pretty modest, is very mild.”

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