Dollar firms, Aussie steady after RBA's 'hawkish' rate cut
The dollar firmed on Tuesday as traders weighed tariff worries, geopolitical uncertainties and the path to U.S. rate cuts, while the Australian dollar held near two-month highs after the Reserve Bank of Australia cut rates but cautioned on further easing.
Traders eyed talks on Tuesday aimed at ending the Ukraine war, as U.S. and Russian officials met in Saudi Arabia's capital Riyadh.
Ukraine, which is not attending the talks, says no peace deal can be made on its behalf.
The euro was 0.24% lower at $1.04575.
The single currency rose last week as optimism grew over prospects of a peace deal between Ukraine and Russia. It traded at its highest in more than two weeks on Friday at around $1.051.
Sterling eased 0.1% to $1.2611.
"Markets will remain focused on any developments on the U.S.-Russia bilateral talks on Ukraine," said Francesco Pesole, foreign currency strategist at ING.
"But barring a major breakthrough, the optimistic push and relative upbeat risk sentiment may stall or fade in the next couple of days and the dollar can continue to recover some ground."
ANZ now expects rate cuts to resume in the second half of 2025, with a further 75 basis points of easing anticipated. Markets though are only pricing in 40 bps of cuts for this year.
The dollar index , which measures its performance against six other major currencies, was 0.2% higher at 106.94, but still not far from the two-month low of 106.56 it touched on Friday.
The Reserve Bank of Australia (RBA) cut its cash rate by 25 basis points to 4.10% on Tuesday in its first easing since the 2020 pandemic, but was cautious about prospects of further policy easing.
That left the Australian dollar steady at $0.63599 after an initial burst of choppiness following the decision. The Aussie touched a two-month high of $0.6374 on Monday and is up 2.4% in February.
Elsewhere, the yen was on the back foot after its recent gains as strong growth data bolstered odds of the Bank of Japan raising interest rates again this year, with July seen as a live meeting.
The yen was last at 151.9 to the dollar, down around 0.3% on the day. Japan's solid October-December GDP data on Monday, coupled with recent inflation numbers, have helped lift the yen. It is up 3.5% against the dollar so far in 2025.
Source: Reuters
