The Australian dollar is inching towards 104.5 US cents as market players sell the US dollar in response to some disappointing US economic data.
However, moves were limited on Tuesday ahead of the Reserve Bank of Australia’s interest rate decision at 1430 AEDT.
At 1200 AEDT, the Australian dollar was at 104.43 US cents, up from Thursday’s local close of 104.22 US cents.
The weakening of the US dollar, which began during the overnight offshore session after a weaker-than-expected US manufacturing report, continued when Australian markets reopened after the Easter long weekend.
The Australian dollar began a shortened post-Easter week at 104.22 US cents and ground its way up to an intraday high of 104.45 just before noon AEDT.
“That theme of US dollar weakness has continued this morning during Asian trading hours,” CMC Markets senior trader Tim Waterer said.
“But it is quite a tentative move at this stage, particularly with an RBA announcement waiting on the doorstep this afternoon.
“I think any moves of greater significance will be reserved until after we see what the statement from the RBA contains.”
While the central bank was widely tipped to keep the cash rate unchanged at three per cent, interest will be on governor Glenn Stevens’ accompanying statement for clues about the RBA’s thinking on the future direction of rates.
Mr Waterer said the Australian dollar would react positively – perhaps rallying up to 104.7 US cents – should the RBA statement suggest rates were likely to stay on hold for the foreseeable future.
Meanwhile, the Australian bond market was flat at noon.
At 1200 AEDT, the June 10-year bond futures contract was trading at 96.585 (implying a yield of 3.415 per cent), broadly unchanged from Thursday’s local close of 96.570 (3.430 per cent).
The June three-year bond futures contract was at 97.120 (2.880 per cent), compared with 97.130 (2.870 per cent) previously.