The Australian dollar has held onto its gains after the Reserve Bank of Australia gave no indication there would be a third interest rate cut this year. 
At 0700 AEST on Wednesday, the local unit was trading at 89.87 US cents, up from 89.81 cents on Tuesday. During the offshore session the currency peaked at 90.07 US cents, its highest level since last Wednesday.
On Tuesday afternoon, the RBA cut the cash rate by a quarter of a percentage point to a new record low of 2.5 per cent. The bank’s most recent reduction before that was a quarter of a percentage point cut in May.
A rate cut would normally put downward pressure on the Australian dollar but the short statement from the RBA turned out to be a positive for the currency, BK Asset Management New York MD Kathy Lien said.
“The neutral tone of the RBA statement and the lack of update on China or their outlook for the mining sector suggests that the central bank is not considering additional rate cuts at this time,” she said from New York.
“I think the key here is that investors interpreted it as the RBA shifting from a dovish stance to a neutral stance, with there being no major threat of additional rate cuts.”
Early on Wednesday morning, Australian time, Federal Reserve Bank of Chicago president Charles Evans told reporters that he expects the US economic growth to accelerate in the second half of 2013.
That would allow the US central bank to slow down its economic stimulus program.
“While the Aussie dollar is recovering, continued speculation about Fed tapering could limit the Aussie dollar rally,” Lien said.
She expects the Australian dollar to trade between 89.50 and 90.50 US cents on Wednesday.
AAP
